Prohibition of Gambling

The Arabic term Gharar is translated as uncertainty, risk, speculation or hazard. Islamic anticipates the inherent uncertainty and risk of business transactions. Gharar refers to speculative risk or deceit which might give undue benefit to one of the parties. This includes sale of an item that is not present, a crop that has not grown, or a future event which is not known. The basis for such prohibition in business transactions is to minimize the inherent risks, to guard against unexpected events, or to avoid disputes at the consummation of the contract. All the facts related to the transaction should be declared to the contracting parties to ensure fair trade.

Many transactions in modern finance come under gharar. These include futures and options contracts because their value is speculated on a future date and whether or not the option will be exercised. Short sales also come under gharar as one trader is selling something that he or she does not own. Forward currency transactions would also constitute gharar as interest rate difference is used at spot rates for one end of transaction and a future speculated rate is used for the other end.

Maysir/Qimar includes any speculation, wagering or betting where there are overwhelming odds of complete loss. Maysir is the term used in Quran where Qimar commonly appears in Hadith. Both essentially refer to the gambling activities and games of chance. Commercial risk which is inherent in the business transactions does not constitute Maysir or Qimar. These terms primarily mean taking risk with money without putting any effort in the hopes of getting a huge return. The examples include lotteries, draws, interest dependent investment schemes, futures, and options. Islam is opposed to effortless gain which is evident in gambling. Even though one can gamble with small amounts for the miniscule chance at a huge return, it is an addicting activity and makes one lazy and dependent. The gambler would keep on playing in the hopes of winning until his small trials have turned into huge losses. Gambling is destructive to societies and individuals and hence is prohibited in Islam.