The legalization of gambling in the United States is on the rise, with new casinos popping up in various locations outside of Las Vegas. Even professional sports leagues that were once against sports betting are now embracing it. Despite its questionable social benefits, gambling is open to the general public, subject to certain age restrictions. However, startup investing, as well as investing in venture capital funds or collectible art, is not accessible to all.
These activities are limited to what is known as “accredited investors.” The American government seems to prefer people risking their money on casino games, where the odds are stacked against them, rather than investing in startups that have the potential to succeed. Accredited investor laws restrict certain types of investing to so-called “sophisticated investors.” However, sophistication is not measured by knowledge or experience, as there is no test to determine it. Instead, wealth is the determining factor. According to the government, being sophisticated means having an annual income of at least $200,000 or a net worth exceeding $1 million.
Interestingly, how much someone knows about the investment is irrelevant. This means that a 60-year-old who inherited a family construction business can freely invest in AI startups, while a 24-year-old with a degree in machine learning cannot. These laws, although meant to protect ordinary people from risky investments, are enforced by the same government that encourages them to play the lottery, which has terrible odds and is directly marketed to the poor. Economists refer to this as a “regressive tax.”
These rules contribute to wealth inequality, as asset prices have consistently outperformed wages over time. Those who derive their wealth from investments have fared better than those who solely rely on earned income. While many types of investments have performed well, those reserved for the already wealthy have seen the most significant gains.
Cryptocurrency has been an exception to this trend. Bitcoin and Ethereum, in particular, have been both accessible to the public and highly profitable investments. However, the U.S. government has intervened and declared the Ethereum ICO illegal due to the participation of ordinary people. If it were up to the government, the enormous returns would have gone to those who needed it the least.
As a result of these regulations, most crypto projects now raise funds from venture capital funds or angel investors, who are also accredited. Additionally, most crypto projects limit the eligibility of recipients for their airdrops. The government claims that these measures are in place to protect people, but at the same time, it allows complicated same-day parlays to be advertised to countless individuals before sports matches. While over half of all Americans have reportedly gambled in the past year, fewer than 20% qualify as accredited investors.
Cryptocurrency often serves as a reflection of our society, forcing us to critically examine how things currently operate and presenting an alternative perspective. It highlights the shortcomings of our legal and regulatory system, which may not be the most flattering view.
Disclaimer: This article is for general informational purposes only and should not be taken as legal or investment advice. The opinions expressed are solely those of the author and do not necessarily reflect the views of Cointelegraph.