Memecoins, casinos, and gambling
Today Trump launched his own memecoin, $TRUMP.
My head is still spinning from this. Certainly this was not on my 2025 bingo card. And certainly something to file under “things the Founding Fathers couldn’t have anticipated”.
At it’s base, however, people are gambling. They are consensually adding funds to a pot, and hoping to take out more than they put in.
And by that definition, there are lots of other games in society that if you squint, do look similar (ie: investing in stocks, buying lottery tickets, playing poker, sports betting – to name a few).
However, that said. It raises the question: what kinds of gambling are good? And to answer that question, I think we should first ask: what kinds of gambling have which kinds of externalities?
The casino lobby
I honestly blame memecoins on the casino lobby.
I think most people would happily have their gambling itch scratched playing poker and roulette online. Or betting on football or elections.
But no, the casino lobby made gazillions and now the easiest, highest-margin way to make money known to man are now … bizarre attention contests.
At least prediction markets are a net societal good! Markets there have the potential to help us price humanity-level events and situations. A prediction market on which county in CA will have the highest average fire insurance premiums is not the evil you might imagine it to be.
As for games, at least in poker you use your mind. The rules are clear, and the game’s hidden state is transparently clear to all players. You might even have fun and make some friends.
Gambling and the law
Other than the obvious cases of non-consensual bodily harm (see: assassination markets), I’m not sure if I believe any forms of gambling should be illegal. At least using like, dollars or crypto or beads and trinkets. (People probably shouldn’t be able to gamble their kidneys.)
But if one had to draw lines, the spectrum of legal gambling should be arranged by societal good. If we treat human nature as a given, we have to accept that people will gamble. It’s as much baked into our DNA as sex and food. We’re wired to enjoy thrills and winning, espeically for status-conferring prizes, like money.
Under this line of thinking: how should we prioritize access to gambling? I posit we should sort by resulting positive externalities.
The higher the net positive externalities from the game, the more you are allowed to risk, with less effort.
Today, anyone over 18 can:
- Buy lottery tickets
- Load up on options contracts using their life savings on Robinhood
- Buy AMC stock
- Buy memecoins
Are these really the most productive way people can, on average, lose their money?
See, my argument around memecoins isn’t that gambling on AMC or DOGE is bad because “people don’t know the risks”. That’s frankly patronizing. People know the risks. It’s stupiid and they know they might lose, but they want to anyway.
My argument is that it’s unproductive (or rather, less productive than other forms!).
So if we humans have this irreducible gambling urge, let’s at least tax and think about access in a way that beneifts humanity (or at least benefits more people, more widely).
Ranking gambling by positive externalities
High legality, no friction
These are the most productive forms of gambling for the world.
- Investing in broad market ETFs: propel productive companies to make things and discover the future, give markets inertia, diversification of risk
- Prediction markets: disemminate knowledge and price risk
High legality, low friction
Maybe you should have to sign something that says, “I know these are risky, but I’m willing to take the risk”.
But still overall, net positive.
- Charity fundraisers: support good causes
- Investing in BTC: keep governments honest
- Investing in individual stocks: riskier, but also very productive
Restricted, higher friction:
Maybe you should have to click/sign something that says, “No, really, I know these are SUPER DUMB. I am happy to lose this money”. Questionably net good, perhaps not always.
- Memecoins: benefit celebrities and famous people with few other winners
- Lotteries: few winners, many losers (but to be fair could fund local governments without raising taxes)
Illegal, highest friction
Shouldn’t be allowed. Tantamount to upsurping the rule of low. Net negative more often than not.
- Anything resulting in non-consensual bodily harm: assassination markets, crowdfunding buying soviet nuclear weapons, etc.
I’m not positive these are the correct rankings, nor that I didn’t miss any categories. What am I am certain of is that we should be thinking more about what our laws incentivize.
Laws are about incentives
I worry hyperfinancialization has some weird implications we may not realize yet.
Thinking more about what our laws incentivize is important.
Laws, punishments, and taxes are just incentives, after all!