Pathological gambling (PG) is associated with maladaptive perseverative behavior, but the underlying mechanism and neural circuitry is not completely clear. Here, the hypothesis was tested that PG is characterized by response perseveration and abnormalities in reward and/or punishment sensitivity in the ventral frontostriatal circuit. Executive functioning was assessed to verify if these effects are independent of the dorsal frontostriatal circuit. A group of smokers was also included to examine whether impairments in PG generalize to substance use disorders. Response perseveration and reward/punishment sensitivity were measured with a probabilistic reversal-learning task, in which subjects could win and lose money. Executive functioning was measured with a planning task, the Tower of London. Performance and fMRI data were acquired in 19 problem gamblers, 19 smokers, and 19 healthy controls. Problem gamblers showed severe response perseveration, associated with reduced activation of right ventrolateral prefrontal cortex in response to both monetary gain and loss. Results did not fully generalize to smokers. Planning performance and related activation of the dorsal frontostriatal circuit were intact in both problem gamblers and smokers. PG is related to response perseveration and diminished reward and punishment sensitivity as indicated by hypoactivation of the ventrolateral prefrontal cortex when money is gained and lost. Moreover, intact planning abilities and normal dorsal frontostriatal responsiveness indicate that this deficit is not due to impaired executive functioning. Response perseveration and ventral prefrontal hyporesponsiveness to monetary loss may be markers for maladaptive behavior seen in chemical and nonchemical addictions.