The operating cost of adult and gambling startups
orchidfiles.com127 points by theorchid a day ago
127 points by theorchid a day ago
You may have a cool product in the field of sports betting, casinos, or
lotteries. But almost all social networks and search engines won’t let you
advertise without a license from the required jurisdiction.
I think the more relevant point is:
But almost all social networks and search engines won’t let you advertise without a license from the required jurisdiction.
Which is a good thing! This is an area full of scammers, if you can't set up your business legally, I'm very happy to hear it's more difficult for you to advertise it.
I mean, you also can't advertise illegal drugs either. Doesn't seem to curb demand though. It may actually be more beneficial to allow these things more broadly, because then social safety features can be wedged in between consumers and suppliers more easily and they don't have to deal with a gigantic shadow market that already gets stigmatised to death by the rest of the population. Just accept that a certain percentage of the populations has screwed up dopamine households and try to keep them away from gangsters as best you can. That would probably help society as a whole more than banning everything and pretending the problem goes away if you close your eyes.
>I mean, you also can't advertise illegal drugs either. Doesn't seem to curb demand though.
Making drugs illegal does not eliminate demand, but it absolutely curbs it. The converse is also true, for example legalizing cannabis in Canada has significantly increased demand for it [1]. While it's true cannabis use had been gradually increasing for decades prior to legalization, there was a significant spike afterwards which has since levelled off.
[1] https://www150.statcan.gc.ca/n1/daily-quotidien/231016/dq231...
> The converse is also true, for example legalizing cannabis in Canada has significantly increased demand for it
The relevant thing that link actually says is that more survey respondents admitted to cannabis use after legalization, the obvious problem being that before legalization they would be admitting to a crime, which will suppress response rates.
The same link also points out that the legalization happened right before COVID and then you have a major confounder because even if cannabis use is actually up, you don't know if it's because of legalization or people turning to cannabis over stress from COVID. Moreover, the reported usage increased during COVID but started to decline in 2023. This implies that either the apparent spike was COVID, or that it was something like media reports about recent legalization acting as temporary free advertising and causing a temporary increase in usage. Neither of those is evidence of a sustained increase in demand.
Meanwhile legal options do cause people to prefer legal sources over the black market, and then you get fewer people becoming addicts because the thing they thought they were buying was spiked with something significantly more addictive by a black market seller. Or the black market products have higher variation in the dose and then customers can't predict how much they're getting and occasionally take more than expected, leading to a higher rate of overdose and stronger dependency-inducing withdrawal.
>Meanwhile legal options do cause people to prefer legal sources over the black market
In the case of cannabis it's been showing to lead to less underage use too. If it's a crime, then selling to anyone of any age is still just a crime. But if it's only a crime to sell to under 18/21 then legal shops will avoid selling to the under age to avoid revocation of their license.
> If it's a crime, then selling to anyone of any age is still just a crime. But if it's only a crime to sell to under 18/21 then legal shops will avoid selling to the under age to avoid revocation of their license.
That isn't true; crimes can have aggravating factors and selling drugs to a minor could aggravate the crime of selling drugs.
I don't think the laws were written that way, but they could have been.
There is an incentive to commit a crime when the benefit of committing the crime exceeds the penalty times the chance of getting caught plus the cost of measures taken to avoid getting caught.
This is why increasing penalties have extremely fast diminishing returns. As the penalty goes up, the relative cost of measures to avoid detection goes down, and the penalty needed to counter them becomes exponentially larger.
If the benefit of doing the crime is a million dollars and the penalty is a 50% chance of a year in prison then you have a problem, because plenty of people would be willing to take the risk. But it's actually worse than that, because spending $100,000 on countermeasures might lower the risk of getting caught to 1%, and they're still making $900,000. That might not be worth it when the penalty is a year -- maybe $100,000 in profit is worth a 50% risk of one year? But if you set the penalty to 20 years then it is. Then the gain is $900,000 but the expected penalty has actually fallen to 1% of 20 years, i.e. expected cost of 2.4 months instead of 6. To deter someone with a $900,000 profit who values a year at $120,000 with a 1% chance of getting caught, you would need the penalty to be 750 years, which you can't do because people don't live that long. And spending even more on countermeasures might lower the risk of getting caught even more. If spending $500,000 makes it 0.1%, that may not be worth doing when the max practical penalty is ~70 years, but the option for it means that even 750 years would be insufficient even if it was possible.
This is why there are things it's very difficult to deter. The profit from doing them is more than the cost of making the probability of detection small and then the size of the penalty can't be made large enough to be a deterrent.
That all changes when you legalize most of the market. Now the profit isn't a million dollars, it's $100,000, because anyone can enter the market so increased competition drives down margins. Moreover, $90,000 of the profit was from selling to adults. So now the profit from selling to kids is only $10,000. Not worth spending $100,000 to lower the risk of getting caught. And then you can easily assign a moderate penalty that acts as an actual deterrent.
That seems like the only sensible path forward, if you assume that the only lever a society can pull to make punishment harsher is “longer prison sentences”.
What if the penalty for selling drugs to kids was death?
It seems like that would change the risk/reward calculation pretty substantially.