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2HRS2GO: Online trading turns to gambling

You might find the following headline redundant.

"Day Trading and Internet Gambling Merge" proclaims the news release regarding betatwallstreet.com, which offers casino wagers on stocks. If you believe day trading already is gambling, you'll get no argument from me. But at least Bet At Wall Street makes the leap from semantics to reality.



Have an opinion on this?



Slap down an over-under wager on any of 14 heavily traded stocks: Amazon.com, America Online, CBS Sportsline, Dell, Ebay, E*Trade, Gateway, Intel, Lycos, Microsoft, Priceline.com, Sun Microsystems, Walt Disney and Yahoo. You can also put money on hot IPOs or market index movements.

If you bet the "over" and the stock of your choice finishes the day higher than the betting line, you win. If you bet the "under" and it finishes lower, you win. Bet At Wall Street currently pays about $100 for every $110 wagered, although that could change depending on how the betting moves the spread.

It's a simpler concept than your typical stock investment. Certainly easier than laying down call or put options. "NOW you can play the market and get in on the action with NO commissions or membership fees," blares the website.

Of course, this being pure gambling, NOW you can play the market and get in on the action with NO money left in your wallet if you lose. And if you're looking for a sure wager, there's only one: that betting lines -- taken from European casinos, in case you're wondering -- will be set so that more people lose than win.

"What kind of an article is this going to be? Is it going to be critical or just an informational piece?" asked Anthony Sparango, president of GoBet, which specializes in consulting and marketing for online casinos.

I hope I don't sound too critical. After all, it's your money, and if you want to literally bet on stocks, that's your business. It's no worse than betting on horses, the over-under on NFL games (a practice which has gotten much harder since the late ྌs heyday of Jets/Dolphins games, when Ken O'Brien matched up at quarterback against Dan Marino; you were almost guaranteed a win if you took the over with that one) or the outcome of the presidential election.

"Does that bet the market thing sound like an illegal numbers game?" asked ZDII editor Larry Dignan.

Here's what Sparango says:

"If somebody were to place a wager on the Internet, it'll happen on a server offshore," GoBet's president says. "Since it's not happening in the United States, it's really independent of any U.S. rules in that respect."

GoBet doesn't own Bet At Wall Street, and Sparango wouldn't say who does. The website says its operations are governed by the laws of Antigua, which shouldn't surprise anyone, since most online casinos are based in the Caribbean.

The U.S. Securities and Exchange Commission doesn't regulate gambling. If someone is demonstrably manipulating a stock price through casino betting -- and SEC spokesman John Heine notes that's a pretty big if -- regulators might do something.

But this is small fry playing around, not some insider or large fund firing off a series of block trades; this isn't even on the level of an Internet pump-and-dump chatroom. "This is for a guy who can't get in on an IPO because he only has $200," Sparango says. "He can still make $200 with us."

He also can and probably will lose it. Unlike a casino, stock exchanges isn't specifically designed to produce losers; but remember that the vast majority of stocks haven't risen much in recent years. Also remember that most day traders (70 percent according to at least one industry group's estimate) come out lighter in the pocketbook. So in practice, there's little difference between the market and the casino.

You can hear the counter argument already forming. Day trading involves a lot of technical analysis to correctly follow the trend lines during the day. You have to understand a stock's trading range. Set your targets without deviating, avoid emotion.

But many sports handicappers rely on a similar stream of "scientific" explanation. You have to evaluate a horse against certain tracks and opponents. Remember the Buffalo Bills are a speed team that plays on artifical turf instead of grass. And don't forget the Oakland A's have a terrible road record in recent years.

Of course, Oakland went on a tear during its latest East Coast road stand. And stock momentum can change at a snap.

At least Bet At Wall Street doesn't pretend to serve capitalist ideals. It's there for the same kind of quick thrill offered by your office pool every March for the NCAA men's basketball tournament. Unless you're a gambling addict -- and if you are, then Bet At Wall Street is just a small hill in a mountain range of temptations -- online stock betting remains a harmless diversion.

Other issues:

  • Com21 Inc.
  • (Nasdaq: CMTO) Can't fault the maker of broadband access products for brushing over bad news. The stock is being steamrolled today following the company's decision to announce that it failed CableLabs' latest certification round for cable modems.

    The company didn't even bother waiting for CableLabs to tell everyone else. Com21's news release came out before the one put out by CableLabs. And CableLabs doesn't actually say who didn't get certified, only who did.

    The failure hurts more on a perception level than anything else, but perception is important; Warburg Dillon Read earlier this week began Com21 as a "buy" largely because it would "benefit psychologically" from a CableLabs certification this year.

  • Microsoft Corp.
  • (Nasdaq: MSFT) Former SGI chief Rick Belluzzo might be formally announced today as the new president of Microsoft's Internet division, but it's been expected for weeks. Now if Belluzzo can bring SGI's graphics expertise to shore up the next MSN Zone game, Asheron's Call, that would be something, since Asheron's graphics pale beside the current king of 3D massively multiplayer gaming, EverQuest. Of course, since Asheron's is actually being developed by an outside studio and only published by Microsoft, chances are Belluzzo won't do much on that front. But we can always hope.

    Broad indices were in negative territory this afternoon. The Nasdaq Composite Index was down 24.30 to 2726.50, the S&P 500 down 18.09 to 1312.98 and the Dow Jones Industrial Average lower by 171.92 to 10765.96. 22GO>