My brother-in-law has a system. He says it works on a regular basis, and it must do, because every time he comes to visit us, he goes into the local casino and comes out with some small amount of winnings. ‘Small’? Yes, that’s part of his system. “Most people are just too greedy,” he says. “They imagine they’ll win millions and end up losing everything they have.” If you’re not greedy, he says, you can count on winning small amounts regularly. That helps to pay the rent, it might even buy you a bottle of champagne, so isn’t that worth having? Well, no, not for most people. They buy Lottery tickets in order to win the million pound prize. If they got a letter saying they’d won three hundred thousand, they’d probably be disappointed. That’s part of the problem of gambling: it inspires a level of complete unreality. But that’s the point, isn’t it? The casinos in Las Vegas provide an adventure in a fantasy world. They’d don’t sell ‘reality’. If they did, people wouldn’t part with their money so easily. In fact, they’d win more often. Like my brother-in-law.

The second part of the system kicks in when he sits down. He plays Blackjack, starts slowly and relaxed, and looks round the table to see who else is in the game. He spots the losers, the high-rollers, the emotional types, and distances himself from all of them. Because that’s another way to lose. If you get influenced by the other players, you can’t watch your own game. Of course, in the real world, it happens all the time. Why else did thousands of people invest in ‘dot com’ companies in the ’90s? They were copying other people. Why else have so many people in Britain invested in housing and renting homes, even though the market has peaked and is now slipping down? They’ve listened to other people, they’ve followed what everyone else is doing. You want to win at gambling? Look at your own hand first and consider the odds you’re facing. Then compare yourself to everyone else later, after you’ve got some idea what your chances are.

The next consideration is luck. Successful gamblers know it’s all about luck, but they work with it, play along with it, coax it and cajole it. They never, ever work against it. My brother-in-law says that Blackjack is a game where the cards seem to go in runs. For a while they might be with you and then they’ll turn against you. At that point you need to back off and wait for the good run to come round again. It always does, he says. So he plays with his luck, not against it. He’s placing small bets and if the cards seem to be going his way, he’ll slowly increase his bets, planning on building up winnings. If the hands are going against him, he’ll slow down, minimise the bets and conserve his stake. Why would that work for him? Because most people do the opposite, he says. If they see they’re losing, they’ll panic and increase their bets enormously, trying to win back all the chips they’ve lost. That’s crazy, he says. If the run is not going your way, you need to calm down and minimise, not maximise bets. Above all, don’t panic and wait for your luck to turn, as it always does. If you bet high while the cards are running against you, then all you’ll do is lose bigger. That’s his philosophy and it seems to work.

That might be for two reasons. One is that ‘runs’ do exist. Try it. If you flip a coin and record the results you won’t get a list that says ‘head, tails, head, tails’. Sure, it’s random and there’s an even chance that it will come up heads or tails each time. But it won’t alternate. Instead, you’ll get a list that says ‘heads, heads, heads, tails, tails, heads’ and in that sequence you’ll see runs going one way or the other. In fact, this is a complex point, and fools a lot of people. When the first computer programmers tried to build a Random Number Generator a few years ago they were disappointed at their first results. They kept getting runs. To the untutored eye, it didn’t look ‘random’ enough! But it was. Randomness produces runs. You just have to be conservative enough to see it.

That’s the main point. My brother-in-law is cautious. It’s the way he plays and the way he wins. Because he’s aware of the dangers of following other players; because he’s only aiming to win limited amounts; because he knows the cards could turn against him and produce a losing streak; he’s always reserved and waiting. He never makes snap judgements and takes absurd risks. In the end, he walks out of the casino with money in his pocket not because he’s a great winner, but because most of the other players are big-time losers. They follow other players; they risk high bets; and they compound a losing streak by betting amounts they can’t afford. In the end, that’s why he wins. All he has to do is keep his cool and win some money, standing by while everyone else loses theirs. He watches the cards, places small bets and increases only when he’s feeling safe. But that’s okay. The system works and will continue to work. Because? We know that out of all the people reading this article, most have never set foot in a gambling house, so they’re not rivals. Of those who do, most don’t go regularly and have never thought about applying a system. Of those who have a system, most are still prone to emotional and panicky responses. That leaves, well, how many? Not many. At the end of the day my brother-in-law is a regular winner, but then, how many real competitors has he got?

ited States gambling winnings are considered by the IRS to be taxable income and must be reported on your federal tax return. Gambling income includes, casino winnings, winnings from lotteries, and horse races. Cash winnings as well as the fair market value of prizes such as cars and trips etc. are eligible for Gambling taxes. A payer is required to issue you a Form W-2G or Form 1042-s if you receive gambling winnings subject to Federal income tax withholding. All gambling winnings must be reported as income even if no casino tax is deducted. Foreign nationals such as residents of Canada and the United Kingdom may be exempt from paying tax and be subject to a full casino tax refund due to provisions within their tax treaties with the United States. It is advised for Foreign Nationals claiming tax treaty provisions to use the services of an IRS Certifying Acceptance Agent to effect a US tax recovery. You may deduct gambling losses only if you itemize deductions. Claim your gambling losses as a miscellaneous deduction on Schedule A . However, the amount of losses you deduct may not be more than the amount of gambling income you have reported on your return. It is important to keep an accurate diary or similar record of your gambling winnings and losses in order to claim your casino tax refunds. To deduct your losses, you must be able to provide receipts, tickets, statements or other records that show the amount of both your winnings and losses. Refer to IRS Publication 529, Miscellaneous Deductions, for more information.

Diary of winnings and losses. You must keep an accurate diary or similar record of your losses and winnings. Your diary should contain at least the following information. - The date and type of your specific wager or wagering activity. - The name and address or location of the gambling establishment. - The names of other persons present with you at the gambling establishment. - The amount(s) you won or lost. Proof of winnings and losses. In addition to your diary, you should also have other documentation. You can generally prove your losses through , wagering tickets, canceled checks, substitute checks, credit records, bank withdrawals, and statements of actual winnings or payment slips provided to you by the gambling establishment.

For specific wagering transactions, you can use the following items to support your winnings and losses. These recordkeeping suggestions are intended as general guidelines to help you establish your gambling winnings and losses. They are not all-inclusive. Your tax liability depends on your particular facts and circumstances.

Keno. Copies of the keno tickets you purchased that were validated by the gambling establishment, copies of your casino credit records, and copies of your casino check cashing records.

Slot machines. A record of the machine number and all winnings by date and time the machine was played. Table games (twenty-one (blackjack), craps, poker, baccarat, roulette, wheel of fortune, etc.). The number of the table at which you were playing. Casino credit card data indicating whether the credit was issued in the pit or at the cashier’s cage.

Bingo. A record of the number of games played, cost of tickets purchased, and amounts collected on winning tickets. Supplemental records include any receipts from the casino, parlor, etc.

Racing (horse, harness, dog, etc.). A record of the races, amounts of wagers, amounts collected on winning tickets, and amounts lost on losing tickets. Supplemental records include unredeemed tickets and payment records from the racetrack.

Lotteries. A record of ticket purchases, dates, winnings, and losses. Supplemental records include unredeemed tickets, payment slips, and winnings statements.

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The internet is a wonderful source of information - both good and bad. It’s also a playground of profitable possibilities for would-be and seasoned shysters and scam artists. Apart from pornography, one of the most prevalent types of content one can find on the web is in the moneymaking category. And I guess, like sex, money has universal appeal!

The starting point in getting to grips with this reality is to realise greed plays a big part in human nature. Sorry to be so blunt, but it seems we’re wired for it. You see this played out over and over - whether it’s men and women battling each other to grab the best garments in a crazy sale, or crazy people queuing up to get financially fleeced in some hair-brained pyramid money game. The motivation is the same. Something for nothing - or almost nothing. And that desire is fueled by greed.

If you can accept you may have a built-in propensity to seek the easy route, to get your hands on easy money - and factor that into your decision making - then you will be in a much better position to more rationally appraise various moneymaking opportunities.

There are two main generic scams continually circulating on the internet. One is the “advance fee” scam, and the other is the “Ponzi” or pyramid scheme. The first is epitomised by the “Nigerian Letter” fraud - which is essentially a promise of big bucks in exchange for processing fees to retrieve the money. This often involves receiving an email announcing you have either inherited or won a lot of money, and that you need to open an offshore bank account to retrieve it. The strategy is to suck you into the scenario to such an extent that you become emotionally wedded to it. Then, when you are asked to put up a fee to make things happen, you are already hooked and part with your cash without a whimper. The promoters then disappear with your cash, never to be seen again.

The ponzi scam is named after Charles Ponzi who came up with the novel idea of enticing investors with the promise of very large returns - and paid them out of new investors’ money. In the end, of course, the last investors lost their money, and the whole thing was exposed as a complete fraud. Some ponzi schemes are very crude - like the original chain letter. You’d think we would have risen above that one - but it keeps on resurfacing. However, most are now more sophisticated, often disguising themselves as an “investment” with unusually high returns.

Over the last few years such ponzis have sharpened their act, and now present themselves with smart, professional looking websites - plausible wording and an enticing sales pitch. The primary hook, apart from the promised returns, is the referral fee - if you recommend others. In this way, the modern ponzi can harness the viral marketing power of the internet in ways impossible in the snail mail age.

Now I have nothing against people playing money games as such (it’s their money), provided they know the rules of the game, and understand the risks. You see, I’m very much of the opinion that people should be allowed to do what they like with their own money. However, when you remove regulatory oversight, you have to take responsibility for your own decisions, and realise what you are getting into.

If you know the risks, then it?s like gambling - where it is clearly understood that there are winners and losers. However, it does appear that some people can’t tell the difference between gambling (in all its forms), a ponzi, and an investment. And this fact is often used by the authorities as an excuse to enact laws to protect people from themselves.

For example, it’s imperative to distinguish between ponzi schemes and gambling. And it shouldn’t be hard. Gambling involves taking a stake in a money game where there are clear rules and directives as to who becomes the winner. Luck is the usual arbiter in gambling - and this is managed in various ways. It could be Lotto, where numbers are drawn from a barrel; it could be a lottery where one person has the lucky ticket number; or it could be horse racing or sports, where you place a bet on the outcome of the race - where “form” and luck both play a part. The point is, in gambling you know there will be winners and losers, and you know the means by which this will be determined. You have full disclosure

Not so with a pyramid or ponzi. If a ponzi is disguised as an investment, then it is likely to offer high returns (to appeal to greed), and use referral fees to get people to spread the word. Now, the explicit message is that everyone who joins up will make say 10%, 20% or even 100% per month on their money. However, the truth is only the early birds will catch the worm and walk away with the loot. Why? Because the funds to pay out the promised returns come from the new players, and eventually they run out.

The pertinent question is, do these new players fully understand they are funding earlier “investors”, and do they realise they could lose their shirt? Probably not. If a moneymaking scheme states that it is a “game”, makes no guarantees, and openly declares that your money is paying those before you, then you know the rules before entering and cannot cry over spilt milk if you lose your money. On the other hand, if money is taken using terminology that indicates a legitimate investment is being offered - which later turns out to be a ponzi - then clearly the participants have been defrauded because they were not told the true facts.

In a situation like this, one should be able to pursue legal action to reclaim the lost funds - because such money was taken under false pretences. However, such a retroactive course of action does not mean one shouldn’t exercise rational judgement before entering into any form of investment - even more so, if exceptional returns and referral bonuses are being paid.

So you have gambling, which clearly discloses the risks inherent in participating; ponzi/money games, which usually don’t, and are essentially fraudulent offersm and finally you have real investments. Of course, putting your money into legitimate investments does not eliminate the risk of losing your money - it’s just that such a structure is not set up with the purpose of defrauding you. When you invest your money you should demand full disclosure as to the inherent risks of the proposition. However, no investment is 100% safe. Even government bonds depend finally on the state’s ability to forever tax its citizens - something I personally wouldn’t want to bet on.

So to recap: the essential difference between a scam, gambling and an investment - is the “rules of the game” are known in advance, and you participate in the full knowledge of the risk you are taking. A ponzi scam deliberately misleads, whereas gambling and investing offer disclosure as to the risks.

You cannot avoid risk of course - it is part of life. You will never find a truly risk-free investment. Even money in the bank, in most countries, is deemed “unsecured” - and therefore at risk, should the bank fall over. So accept risk as part of life and concentrate on weighing up the risk - according to your own requirements and your psychological response to such risks - against the perceived benefits you may receive. And remember, you alone are responsible for the decisions you make. Caveat Emptor! “Let the buyer beware”.

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