28 US Code §5362(1)(A) defines a bet or wager to be:

the staking or risking by any person of something of value upon the outcome of a contest of others, a sporting event, or a game subject to chance, upon an agreement or understanding that the person or another person will receive something of value in the event of a certain outcome

(1)(E) then explicitly states that this does not include, inter alia, "any contract for insurance".

My question is this: Ignoring (1)(E) and relying solely on the literal text of (1)(A), would insurance contracts have to be considered bets or wagers?


4 Answers 4


Gambling creates a risk where none exists. Gambling provides the opportunity for gains or losses.

Insurance mitigates an existing risk of loss. The buyer of insurance has no opportunity for gain. The opportunity is to be made whole.

EDIT: I suppose that I have provided the practical difference. The legal difference is that the statute distinguishes between the two.

  • 2
    This does not answer my question.
    – user43
    Aug 14, 2015 at 14:10
  • 3
    That's a very idealistic view of insurance. The seller of insurance certainly has an expected positive gain. The buyer has an opportunity for gain, although he can't have expected positive gain without committing fraud.
    – feetwet
    Aug 14, 2015 at 23:19
  • 1
    Idealistic, perhaps. Widely accepted, definitely.
    – jqning
    Aug 14, 2015 at 23:20
  • 2
    @KennyLJ: how does this not answer the question? The insuree does not receive something of value, they loose something of value, and then have all or a portion of that loss repaid. Insurance reduces your loss, it does not eliminiate it, because your payments are not repaid.
    – jmoreno
    Mar 14, 2018 at 23:36
  • @jmoreno Insurance meets the quoted legal definition of gambling. The question is, why isn't it legally considered gambling?
    – user253751
    Jun 24, 2021 at 8:34

I would say no.

The language requires a bet or wager to be based upon one of:

  1. a contest
  2. a sporting event
  3. a game

Since insurance involves none of those things, I would say the answer is, "no."

I assume when you write "insurance" you mean the typical types of insurance like property, casualty, life, fire, etc.

  • I agree with this. I'll delete my answer.
    – jqning
    Aug 14, 2015 at 20:52
  • What about event insurance (a.k.a. cancellation insurance)? Especially if bought for a sporting event? (Not sure what this would prove, other than that it's important to read statutes in their entirety?)
    – feetwet
    Aug 14, 2015 at 23:32
  • @feetwet: Agreed. My comment in italics was intended to exclude "specialty" type insurances like "raffle ticket insurance" or "hole-in-one" insurances that are often purchased and sold for promotional events. I'm sure the insurance companies have various carveouts in their respective codes for that (e.g., (1)(E)). But I felt the intent of the question was aimed at insurance in the main. Aug 15, 2015 at 0:17
  • Is there a legal definition of what "a game subject to chance" is? (It would seem to me that a contract with payouts contingent on whether the White House burns down is no less "a game subject to chance" than a contract based on whether the New York Yankees win the next World Series.)
    – user43
    Aug 15, 2015 at 2:53
  • @KennyLJ: Not sure if there is a legal definition of game. But there is a dictionary definition: "a form of play or sport, especially a competitive one played according to rules and decided by skill, strength, or luck." There is also a "game theory" definition: "...the outcome is determined by the behaviors of at least two players according to a set of rules." The scenario you present is "subject to chance" but not "a game" under those ordinary definitions. If you have a definition of a game that would include a naturally disaster as one, please share it. I would be curious. Aug 15, 2015 at 11:20

In general insurance is not gambling (according to that law). However consider a golf club which has a tradition that if you hit a hole in one, you buy everyone in the club a bottle of champagne. In that case, you might take out insurance against those costs, and that depends on "a sporting contest" (or possibly "a game"). As such, without the exception you quote, this insurance policy would be illegal gambling.

  • When the lottery started in the UK 20 years ago, you were offered insurance for the risk that your ten employees started a syndicate, won the lottery, and all quit their jobs at the same time. You don't hear of that anymore.
    – gnasher729
    Jun 28, 2021 at 13:59

TL;DR: insurance isn’t gambling, but has sufficient similarities that it is better to be explicit.

Possibly under some circumstances. Consider insurance for a race car, if the vehicle wins it probably won’t be totaled, conversely if it is totaled, it probably won’t win. Lesser damage also decreases the chance of winning to some extent. Could it be considered gambling to insure the vehicle when the payout will depend upon a skill utilized in a sport?

The spirit or intention of the law is clear, but courts rarely rule on what the law meant, but rather on what it actually says. So, an explicit statement is added saying that regardless of any other factor, insurance isn’t to be considered gambling.

As for the difference between the two and why insurance is allowed while gambling isn’t. It’s for the same reason that damages from lawsuits aren’t taxable —- it’s not considered a gain, but instead countering a loss. Insurance isn’t a contest, where you risk your assets in order to get a reward. The insurer doesn’t get a reward if the event happens, and the insuree’s “gain” isn’t considered a gain, but rather a restoration to normal (or wholeness). Thus no one gains and there is no risk/reward taking place.

The insurance companies loss might be considered gambling, but they are expected to take that into account so that it is an expected expense and not a gamble. Pure applied statistics with a margin sufficient to prevent their expenses from out running revenue. States have laws requiring liquidity coverage ratio, in order to make sure that gamble isn’t too much for them to afford.

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