That's easy to get around. I don't want Duke to win the NCAA Tournament. I will pay you $X to insure against that happening, but if it does, my insurance policy kicks in to the tune of $Y.
You mean easy to get around if that's what the law actually said? Sure, the distinguisher I gave doesn't easily translate into cheaply applicable test that law enforcement can use; it's more for identifying categories of activities that look more like gambling vs insurance so that lawmakers can identify which are worth banning. It's hard to externally identify that on individual cases.
With that said, given appropriate modifications, your example could legitimately be called insurance. If
- There were a quantifiable decline in prestige from the loss (per sibling comment), and
- the payout were low enough that the insurer thought that you'd still prefer winning to loss+payout, and
- this were a common enough thing
Then yes, it would look a lot more like insurance and merit being regulated like that and less like gambling.
Here's an interesting and topical example: the "billion dollar bracket" challenges you're seeing right now with the NCAA Tournament are all insured. The company offering the "prize" isn't going to be out $1B if someone hits a perfect bracket; they've got insurance to cover the event that someone wins. (The cost of that insurance is rumored to be around $10M.)
Those challenges are all free, though you could get really deep and argue that consumers are paying incremental value for providing email addresses and marketing leads to the customer.
