Kol Torah wishes Mazal Tov to Rav Yair Manas, who is one of 15 TABC alumni to receive Semichah at RIETS Chag HaSemichah last week. We also wish Mazal Tov to Rav Yair and his wife Gillit on their Aliyah that they made this past week, and on the marriage of their brother Ari ’07 three weeks ago.
The question as to whether transacting in stocks is considered to be a forbidden form of gambling, according to Halachah, has not been thoroughly addressed in contemporary Halachic literature. The goal of this essay is to serve as the beginning of a discussion about trading securities according to Halachah. Please direct comments to firstname.lastname@example.org. A great resource utilized in preparing this is Rabbi Jachter’s article on “The Torah’s View of Gambling,” found in Gray Matter Vol. 1, pgs. 125-132.
A Mishnah in Sanhedrin (3:3) lists dice players among a group of people that are disqualified from being a judge or a witness (as explained by Rashi). Rabi Yehuda adds that the dice player is disqualified only when he does not have another job. Rami Bar Chamah (Sanhedrin 24b) explains that dice playing is considered to be an “Asmachta,” literally translated as “reliance,” meaning that each participant relies on winning. Consequently, the loser assumed that he would win, and when the winner forces the loser to pay, it is akin to the winner “stealing” from the loser.
Rav Sheishet explains that the act of gambling is not considered to be an Asmachta, so the winner is not “stealing” from the loser. Rather, a gambler is disqualified from being a judge or witness because he does not contribute to society. The Yad Ramah (Sanhedrin 24b) elaborates that this person does not adequately appreciate the value of money, which is in accordance with Rabi Yehuda’s opinion in the Mishnah. The practical difference between Rami Bar Chamah and Rav Sheishet, as explained by the Gemara, is a case where the gambler has a job in addition to gambling. Rami Bar Chamah would disqualify the gambler because he is still a thief, and Rav Sheishet would allow the gambler to act as a judge or witness, because he now recognizes the value of money.
The Rationale of These Opinions
Rashi explains that Rami Bar Chamah thinks that gambling is an Asmachta because when a person plays a game, whether that game is skill-based or random, the person expects to win. If he loses and is forced to pay the winner, the loser does not willingly pay. Since each person expects to win, the winner forces the loser to pay, thereby rendering the payment as being akin to stealing. Thus dice playing is forbidden according to Rami Bar Chamah.
Rashi, as elaborated on by Ri (quoted in Tosafot to Sanhedrin 24b “Kol”), explains why Rav Sheishet does not consider dice playing to be an Asmachta (so playing it is allowed). Rashi explains that something is considered an Asmachta when there is a condition in the person’s hand to fulfill, and the party thinks that he will fulfill the condition. Tosafot quotes the following example: a person makes a deal to be a sharecropper and says that if he fails to work the field, he will pay one-thousand Zuz. This agreement is an Asmachta because the person did not intend for the condition to come about, i.e. he did not expect to fail to work the field, and working the field is in his hands, i.e. it is up to the sharecropper whether he will work the field or not. In other words, he “relied” (Asmachta) on the condition that prevented him from working the field to never occur, and never intended in his mind to pay for the failure to farm the land.
Dice playing, however, is totally random. When a person agrees to play, he knows that the game is random, and that he may win or lose. Thus, according to Rav Sheishet, a dice player willingly commits to giving over his money because he knows that he may lose, and consequently, dice-playing is not stealing.
Shulchan Aruch and Rema
The Shulchan Aruch (Choshen Mishpat 370:1-2) rules like Rami Bar Chamah, and says that anyone who gambles and collects money is considered to have stolen on a rabbinic level, even when the game is random. Rema (Choshen Mishpat 207:13) quotes Ri’s explanation of Rav Sheishet, and explains that if the game is random, then the participant is not considered to be a thief. It is important to note that in order for the gambler to be eligible to be a judge or witness, he must have another job, as Rav Sheishet explained in the Gemara, and as cited in Rema (Choshen Mishpat 370:3).
One important question that has been discussed regarding stocks, and that has ramifications for this question, is the status of a stock owner in Halachah. There is no clear precedent in Halachah regarding how to view stock ownership. This question has many serious ramifications, such as whether a person may own stock in a company that violates Shabbat (practically all publicly traded companies do), whether a person may own stock in a company that owns Chameitz on Pesach, or whether a person may own stock in a company that transacts in forbidden foods (such as McDonald’s). [For an excellent discussion of these topics, see a six-part series by Rabbi Dr. Asher Meir, available on the Virtual Beit Midrash, http://vbm-torah.org]
One option is to consider stock holders to be the owners of a company. The stock holder becomes a partner of the company, and as such has all rights that come along with ownership. Rav Yitzchok Yaakov Weiss (Responsa Minchat Yitzchak 3:1), and Rav Moshe Sternbuch (Moadim Uzmanim 10:3:269 footnote 1) take this approach. If so, transacting in stocks is not considered to be gambling, because the purchaser is not speculating about a future event, but rather is engaging in the buying and selling of an actual chattel. Though this approach helps to avoid any gambling issues, it poses problems for all of the aforementioned issues. According to this approach, investing in the stock market would be allowed by Halachah.
Rabbi Moshe Feinstein (Responsa Igrot Moshe Even HaEzer 1:7) argues that stock owners are not considered to be partners, but instead purchase a right to the profits and losses. Based on this approach, the stock purchaser does not receive anything concrete in return for his money, and effectively is paying money for the chance of future profits (and losses). Rav Moshe even suggests that under a strict Halachic perspective, no valid transaction occurred, as nothing was received in return (see Rambam Hilchot Mechirah 22:1). Rav Moshe nonetheless concludes that the transaction is valid under the “law of the land.”
Based on this approach, purchasing stocks may be akin to gambling, as it is betting on an outcome. If so, the real issue is whether success in the stock market is considered to be random. If yes, then Rema would allow it, as a bet on a random result is not an Asmachta. If the stock market is not random, then purchasing stocks may akin to stealing, and would thus be forbidden.
The experts debate whether success in the stock market is random, or whether it is skill based. In his Random Walk Down Wall Street, first published in 1973, Burton Malkiel argues that the stock market is highly efficient. Outperforming the market is a result of randomness and luck. Thus, stock market prices are random and cannot be predicted, so Rema would presumably allow one to purchase and sell stocks.
In 1984, Warren Buffett published an article, “The Superinvestors of Graham-and-Doddsville,” where he argues that investing is not random, and that a strategy can improve investment returns. Accordingly, investing in the stock market may be forbidden according to Rema, because it is a skill-based form of gambling, which is considered to be an Asmachta. Consequently, when the investor accepts the profits, he is considered to be stealing from the person who sold him the stock on a rabbinic level.
Opinions of Rav Soloveitchik and Rav Ovadia Yosef
Rabbi Joseph B. Soloveitchik, as quoted by his son-in-law and student, Rabbi Aharon Lichtenstein, would nevertheless allow purchasing stocks (available at http://www.etzion.org.il/vbm/archive/2-halak/pais.php). Regar-ding the purchase of lottery tickets, Rav Soloveitchik explained that the person purchased an actual ticket in the hope that he would win something in the future. In other words, Rav Soloveitchik suggests that we view the purchase of lottery tickets as equivalent to the purchase of any other good. One party pays one dollar in exchange for a piece of paper with numbers on it. Thus, buying a lottery ticket is not an Asmachta, because an actual exchange occurred, and is not viewed as a bet on the future.
Rav Soloveitchik explicitly compares the purchase of a lottery ticket to the purchase of a stock. By stocks, the purchaser pays for and receives a stock certificate in the present, so we view the transaction as having been completed, and any profits or losses only come at a future date. According to this approach, a person is allowed to invest in the stock market, regardless of whether he follows the Shulchan Aruch or Rema, as buying stock is similar to any other transaction involving the sale of goods.
Rabbi Ovadia Yosef (Responsa Yabia Omer 7:6), however, argues that a Sefaradi cannot purchase a lottery ticket because the Shulchan Aruch rules that this is an Asmachta, and akin to stealing. Seemingly, this logic should apply to owning stocks as well, unless we view the stock owner as an actual owner of the company (see above).
Rivash (Responsa 432) argues that one should not engage in dice playing on moral grounds, and even Rav Sheishet, who does not view gambling as akin to stealing, views it as a deplorable act. One may argue that purchasing stocks is different, because it gives capital to companies that are vital to the economy, and helps bring essential goods to consumers.
Thus, the question of whether transacting in stocks is considered to be gambling depends on how we view stock ownership, and how we decide the Halachah regarding dice playing. It seems that there is sufficient ground to allow transacting in stocks for Ashkenazim, but Sefaradim may have to ask a competent Poseik about this issue.