New retail trading and betting products blur the lines between gambling and investing, worrying watchdogsGiorgio Chellini of Italy pulls back Argentina's Lionel Messi in a recent friendly. US gambling regulators are testing an app that matches traders who want to buy and sell sporting positions – who will win a particular game, how many points or goals will be scored – before and during an event. Photograph: Glyn Kirk/AFP via Getty ImagesLet’s say you have a hunch.
Investors who have strong feelings about Tesla can always buy its stock. But US retail customers this week got a new way to juice their exposure to a big rise or fall in the share price. Several companies will offer exchange traded products that mimic and multiply the daily movements – or the inverse – of individual stocks.
That gradually changed as game-like trading apps and complex ETPs encouraged small bets on the price changes of indices and commodities in addition to making it easier to buy shares. The rise of cryptocurrencies, the enforced boredom of pandemic lockdowns and the 2021 meme stock craze all drew in new participants. Some were seeking to invest for the long term, others simply hoped to make a quick buck.
In 2019, UK and European regulators banned local brokers from offering “binary options” – simple up or down bets on the price of a currency, commodity or index as “gambling products dressed up as financial instruments”. The Gamban app that blocks addicts from accessing online gambling last year added crypto, forex and options platforms to its list of banned sites.
Backers of the latest products argue that they are better for small investors than the alternatives. CME distinguishes its “events contracts” from binary options by pointing out that they are sold on exchange, which forces providers to compete on price. Leverage Shares, which already sells single stock ETPs in Europe, argues that the worst thing that can happen to its customers is the loss of their initial investment, while margin loans and options could leave them in debt.
Save? Retirement? What are these words of which you speak?