Betting on Grades?

            A few months ago, With my eldest son heading off for college, my sister sent me an interesting article that she read in USA Today.  It was about a website that actually takes wagers on how a student will do in his college courses.  It started last year allowing students from only two universities to get in on the action.  This coming academic year it has expanded to 36 colleges.  Students can actually wager on whether they will get an ‘A’ or a ‘B’.  The website investigates the specific course at that college and requires that the student allows access to his records in order to determine the appropriate odds.

            Much of the article centered on the legality of this website.  Was it technically online ‘gambling’ and thus currently illegal in the United States?  The owner of the website argues that it is not gambling because the entire wager is based on the skill of the student.  Luck plays no part in it.  This argument reminded me of a story that my father told me some twenty years ago about a court case (I believe in Pennsylvania) as to whether or not video poker was a game of skill or a game of luck.

            In that particular guess, two scenarios were developed.  The first where the Player played perfect strategy as we all know it.  In the other, a simple strategy was used whereby the Player played as one might expect him to play if he just attempted to use some common sense.  Keep in mind, that this was a lot of years ago before there were dozens of books and countless software programs readily available for the average Player.  Video poker was in its infancy.  The simple strategy was probably not far from the strategy most Players were using.

            The computer simulations for our two scenarios showed about a 7-10% difference in the paybacks.  Certainly my father felt that showed a considerable amount of success or failure at video poker was skill.  Knowing which cards to hold significantly reduces the loss rate.  The courts at the time, however, saw it differently.  Despite the significant difference in paybacks, they saw that a significant portion of the return comes from which cards you are dealt or draw and not those that you choose to hold.  No matter how much you might try to sabotage your hand, the ‘luck of the draw’ is still going to allow for a return of a significant portion of your wager .

            In the end, it really comes down to the definition of how much of anything in life is ‘luck’.  Does one baseball team beat another because of luck or skill?  Undoubtedly there are elements of both in the outcome.  How much luck is really involved can be rather subjective and then deciding how much is allowed before the outcome is based more on luck than on skill is also subjective.  Playing roulette requires no skill.  You make a wager, a random number is essentially chosen and you win or lose based on this.  Yes, some wagers have a lower house edge and you can save your bankroll a bit by choosing these options, but the overall outcome is based on how lucky you are at picking where the little ball chooses to stop.

            Video Poker undoubtedly relies on a greater degree of skill than roulette.  As was shown in the court case, a Player can absolutely increase his payback by playing correctly relative to someone who doesn’t know what they are doing.  But, is it enough to say it is more a game of skill than a game of luck.  On a relative scale for casino games, I think absolutely.  When we compare it to the notion of betting on one’s college grades, I have to admit that video poker has a higher degree of luck than college GPAs.  However, even with grades, there can be an element of luck.  So, does this make it gambling?  I don’t know.  I guess I’ll just have to see how it plays out.