The Struggle to Separate Speculation and Insurance from Gambling
This chapter explores the interrelationships among gambling, speculation, and insurance, as well as the attempts through the nineteenth century to distinguish these practices. The idea of wager or even of gambling presents a paradox for contract law. On the one hand, common law contract doctrine considers contracts as contracts that contravene public policy to wager and are therefore unenforceable. On the other hand, contracts are generally assumed to be a mechanism of allocating risk. This paradox raises a crucial question: how risk allocation (legitimate and central to contract) can be distinguished from gambling or wagering (illegitimate and outside of contract). This question is evident in cases where contracts allocate risk statistically (especially insurance contracts), or where contracts are apparently disconnected from any underlying business logic (for instance, in speculative trading of commodities futures).
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