DG MARTIN COLUMN: Lottery or bitcoin
Published 11:32 am Monday, February 14, 2022
How are the state lottery and bitcoins alike?
Or a better question: is a bitcoin purchase better than a lottery ticket?
The answer is yes.
Yes, not because a bitcoin is such a good investment, but because a lottery ticket is such a bad deal for the purchaser. The odds of winning a big lottery payout are just above zero.
Back in 2005 when the legislature was considering a proposal to establish the North Carolina Lottery, I railed against it.
Nevertheless, the legislature, then controlled by Democrats, established a lottery at the urging of Democratic Gov. Mike Easley, whose pro-lottery positions were his major campaign planks. Schools needed the money, he said. People wanted to play the games and were going across state lines to buy lottery tickets. A lottery would be a voluntary tax. Free money.
Most Republicans opposed the lottery. So did lots of liberal Democrats who agreed with libertarian Republicans that running a gambling business is not a proper function of government.
Government, those of us in opposition said, should encourage its citizens to work and save for their future, not on fostering dreams of getting rich by winning the lottery, not stooping to the low level of a carnival barker selling chances on games in which the odds of winning are stacked against the player.
Today the lottery is an established part of state government.
Like it or not.
The lottery takes in billions of dollars each year. About 65 percent of the total goes to pay for prizes. About 7 percent goes to the 7,000 retailers who sell the lottery tickets to individuals. About 4 percent covers administrative costs and the expenses for an increasingly vigorous and compelling advertising program that encourages more people to gamble.
The remaining approximately 25 percent is available to help fund public schools.
So what is the problem? In fact, there are two big problems. As opponents pointed out in 2005, government should not be in a business that private enterprise can manage. Instead, it should encourage its citizens, especially those with limited funds, to save or spend funds for food, rent, clothes, education and other important expenses rather than throwing money after a dream that almost never comes true.
So, the purchase of a lottery ticket is almost never a good investment for an individual.
What about bitcoin as an investment? Not good, but maybe better than a lottery ticket. The value of a bitcoin will either go up or down, making a 50 percent chance of winning or losing.
Still, even if bitcoin is perhaps a good speculation, it is not necessarily a good long-term investment. As Kevin Roose, writing in the Feb. 6, 2022, edition of The New York Times, put it, “One of the most frequent questions asked by crypto skeptics is: What can you actually do with crypto, besides financial speculation and crimes?”
His cautionary response: “It’s a tough question to answer, in part because most of the successful (and legal) uses of cryptocurrency so far have been in finance or finance-adjacent fields. There are plenty of crypto exchanges, NFT [non-fungible token] trading platforms and video games that involve buying and selling crypto tokens.”
Roose, however, argues that few if any of such crypto activities have a use in “solving problems that exist for people outside the crypto world, that aren’t primarily about buying or selling digital assets and that would be impossible to solve with normal, non-crypto technology.”
Perhaps someday, when bitcoin’s value has stabilized, it will have a use as an efficient way to pay bills and hold money safely.
But, if and when the value is stabilized, it will not be an attractive speculative play as it is for some today.
Bitcoin or lottery?
For me, neither one.
D.G. Martin hosted “North Carolina Bookwatch” for more than 20 years.