“O you who believe, intoxicants, Maisir, sacrificing for idols and  making decisions based on games of chance are filth from the work of satan, so avoid these things and you may prosper. Satan desires to create enmity and hatred amongst you through intoxicants and gambling and to stop you from praying and remembering Allah. So will you abstain from these things?” [Quran 5:90-91][1]

Maisir comes from the Arabic word “yisir” meaning ease [2]. It is called this because it is associated with attempts to easily acquire wealth through games of chance.

Generally, if something has a “get rich quick” feel to it, it’s immediately suspect of being Maisir. The Quran also adds to Maisir’s description by saying it has more cost than benefit for society:

“They ask you, O Muhammad,  concerning alcoholic drink and maysir. Say: they contain great sin and benefit for people, but their sin is greater than their benefit. And they ask you what should they give to charity? Say: that which is more than their need, And so Allah shows you wisdom so that maybe you will think” [Quran 2:219][3]

For activities such as gambling, the prophet Mohammad, peace be upon him, did the cost-benefit analysis for us. Gambling is prohibited. The prophet, peace be upon him, said: “whoever tells his friend “let’s make a bet [for money]” should give something to charity as repentance.”[4]
For other acts, such as investing in the stock market, we must do the cost-benefit analysis ourselves. This is why the Quranic verse ends with the meaning “so that maybe you will think”.

Understanding Maisir

Let’s go over some examples to test our understanding and come out with clear criteria for when something is Maisir:

Example #1: Opening a Business

New businesses have an 80% chance of failing in their first five years [5]. How much of a role luck plays in the success of a new business is up for debate. What is not up for debate is the necessity of entrepreneurship and the immense societal value it creates. In addition to creating wealth from their entrepreneurial ventures, they also create jobs and the conditions for a prosperous society [6]. Accordingly, entrepreneurship is not Maisir for either the entrepreneur or the investors regardless of the risks they are assuming.

Example #2: Playing Roulette

A roulette wheel player who can bet on the color red or the color black has a 50% chance of winning. In fact, most games in a casino have better odds than starting a business [7] . Yet all of them are Maisir. This is because there is virtually no indispensable societal value created from playing them. Further, these games’ tendency to cause addiction [8] and financial ruin increase their cost on society substantially.

Example #3: A Lottery Ticket Carrying a 95% Chance of Winning

Here the probability for loss and the stakes of the game are rather small. Yet, similar to a roulette wheel, the activity adds no necessary societal value and has a tendency to cause addiction [9] . Accordingly, a lottery ticket with very little risk is still Maisir because its societal cost-benefit calculation justifies prohibition.

Example #4: Investing in the Stock Market

Proponents of classifying investing in the stock market as Maisir like to point out that the stock market is generally a secondary market. Meaning when you buy stock in IBM, the money isn’t going to IBM rather its going to some other trader. Therefore, there is little societal gain from trading in the stock market. Additionally, the stock market’s high degree of unpredictability makes it look even more like Maisir.

"However, for liquidity purposes, it is absolutely necessary for stock markets to exist. The liquidity that an exchange affords the investors enables their holders to quickly and easily sell securities. This is an attractive feature of investing in stocks, compared to other less liquid investments such as property and other immoveable assets." [10] Without these markets, and the liquidity they provide investors, companies would find it very difficult to lure investors into buying their equity. Accordingly, the value created by stock markets is immense.

From a cost perspective, It’s possible to get addicted to day trading. In fact, many do. Especially in this day and age with technology making trading stocks ever more easy. Day trading is a great way to lose your shirt without the hassle of going to a casino. Being good enough at day trading to make decent money is the exception, not the rule. The SEC warns, “Day traders typically suffer severe financial losses in their first months of trading, and many never graduate to profit-making status." [11]

Alternatively, investing in the stock market with the intention of holding your investments for long periods, like what happens in most retirement plans, is historically a wise thing to do. Over the last 50 years, the stock market yielded average returns of 6.5% and 7% per year after inflation [12] .

So, is investing in the stock market a form of Maisir?

Depends.

If you’re investing to make a quick buck it’s probably Maisir. The amount of value created from trying to “play the market” does not justify the risks entailed.

On the other hand, If you’re choosing companies because of their long-term prospects and you plan on holding your investments for a while, then it’s not Maisir. The probability of loss and tendency to cause addiction are reduced substantially using a buy-and-hold investment strategy.

Example #5: Betting on Horses

The Prophet Mohammed, peace be upon him, allowed jockeys and marksmen to place wagers on themselves saying: “Wagers are allowed only for racing camels or horses or shooting arrows." [13]
So why isn’t this Maisir? How is betting that your horse will win a race different from betting that you can make a three point shot in basketball? Why did the prophet make specific exceptions for horses, camels and shooting arrows?

The prophet, peace be upon him, did the cost-benefit analysis the Quran instructed him to make [14] . At the time of the prophet and for more than 1000 years later horses, camels (in the middle east) and skilled archers were essential tools of war. The prophet, peace be upon him, correctly recognized that competition was essential to evolve the expertise of breeding horses and camels and encourage high level marksmanship. Competitors expend more effort when money is involved, and that’s why the prophet allowed wagers for these competitions.

Some have suggested the prophet’s words mean that betting on horses today is ok. This is a very weak argument since the cost-benefit calculation has changed. Neither horses nor camels are used in wars and the societal benefits of developing expertise in training them are now much lower.
From the examples mentioned above there are two questions one should ask when trying to determine if they are dealing with Maisir:

1. Does the activity create needed value for society?

If the answer is No, then ask:

2. Does someone stand to lose something of material worth based on the outcome of the game?

If the answer is Yes, then it’s probably Maisir and it’s prohibited in Islam.
Note: I would caution against classifying something as Maisir based on its risk level. I don’t think quantifying risk is needed and frankly I’m not sure it can be done. I don’t know how much risk an oil prospector is taking but I know there is value created so I don’t care. As we saw earlier, if a lottery ticket carries a 95% chance of winning, there is very little risk for the player and yet it’s still Maisir because playing it creates no value.

References