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Why do people play this terrible gambit?

Loses against stronger player in SM: It's not the opening, the player was just stronger.
Wins against weaker player in SM: Look, just as I told you, the opening sucks.
With perfect play, every gambit line is probably unsound. That doesn't actually mean that the line isn't playable since most players aren't going to have encyclopedic knowledge of every variation. The advantage to this kind of opening is that you can over-prepare for it compared to a typical opponent.

I often play the Geschev gambit as Black against e4, which is way more unsound than the Smith-Morra, but I win quite a bit more often than I lose with it because I know the lines well and my opponents often don't. I'd never play it in a 90+30 tournament type game, but in a 3, 5, or even 10 minute game you can put a lot of pressure on your opponents with these sort of attacks.

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