“Play not for gain, but sport; who plays for more than he can lose with pleasure stakes his heart.”

—George Herbert

Americans love to gamble. More than half of all adults say they play the lottery, and more than a quarter regularly frequent casinos, according to a 1999 National Opinion Research Center study. Each year Americans lose more than $50 billion on legal wagering in casinos and bingo halls, on lotteries, and at racetracks. They spend an additional unknown amount in private settings, such as poker games, and through illegal channels, such as bookies. “Judging by dollars spent,” writes Timothy L. O’Brien in his book Bad Bet, “gambling is now more popular in America than baseball, the movies, and Disneyland—combined.”

This enthusiasm for gambling is as old as the nation itself. During the Revolutionary War, states sponsored lotteries to...