The Gamblification of Investing: How a New Generation of Investors Is Being Born to Lose

Abstract

Investing and gambling share key features, in that both involve risk the coming together of two or more people, and both are voluntary activities. However, investing is generally a much better way than gambling for the average person to make long-run profits. This paper reviews evidence on two types of “gamblified” investment products where this advantage does not hold for investing: high-frequency stock trading and high-risk derivatives. This review defines a gamblified investment product as one that leads most investors to lose, that attracts people at risk of experiencing gambling-related harm, and that utilizes product design principles from gambling (either by encouraging a high frequency of use or by providing the allure of big lottery-like wins). The gamblification of investing produces novel challenges for the regulation of both financial markets and gambling.

To screen, or not to screen: An experimental comparison of two methods for correlating video game loot box expenditure and problem gambling severity

“…These observations suggests that more research should be done on defining gambling in ways that yield broad agreement. This issue may become increasingly important over time, due to trends in the 'gamblification' of, for example, video games [76] and investing [77] .…”

Cryptocurrencies as Gamblified Financial Assets and Cryptocasinos: Novel Risks for a Public Health Approach to Gambling

“…Given the novelty of the term, its conceptualisation is still up for much valid debate. For example, the gamblification of investment products has recently been defined as a more narrow concept where three key features should be present (Newall and Weiss-Cohen 2022): (1) the product uses design techniques first honed by the gambling industry; (2) investors who use it display similar behavioural patterns to disordered gamblers, such as chasing losses (Gainsbury et al 2014); and (3) that the investment is rarely profitable in the long-term. A broader definition of gamblification has also been proposed based on the analysis of its previous uses in the gambling literature (Macey and Hamari 2022).…”

“…Cryptocurrencies are a novel technological development, and the volatility of cryptocurrency prices means that they raise similar issues around gamblification. While the gamblification of products and services is an emerging area that scholars should keep addressing from multiple perspectives (as highlighted by Macey and Hamari 2022), since cryptocurrencies are largely sold as an investment product this review will primarily rely on the narrower definition of gamblified investment products proposed by Newall and Weiss-Cohen (2022). However, cryptocurrencies pose another unique risk with respect to gambling, in that an increasing number of sophisticated online "cryptocasinos" allow people to gamble online using cryptocurrency assets as their wagers (Brown 2022).…”

Problematic Trading: gambling-like behavior in day trading and cryptocurrency investing

“…Investments allow companies to grow and start new ventures (by using investors' money, acquired through the selling of stocks) at the same time that investors can profit over their own investments in that company. 2 Over the past few years, there has been a significant growth in the number of individual investors. 3 One of the factors associated with this phenomenon was the internet with the increasing amount of social media content aimed at novel investors, as well as the user friendly and accessible trading platforms that can be utilized even through smartphones.…”

“…12 Nevertheless, there is evidence that higher frequency of stocks trading is associated with worse financial returns, with day trading commonly being considered one of the highest frequency types of trading, with only a minority of day traders achieving profits over time. 2 For instance, according to empirical data from Brazil, 97% of the investors (who began trading between 2013 and 2015 in the Brazilian market) who persisted in this type of investment for more than 300 days ended up losing money, with the probability of an individual profiting from this type of investment decreasing with number of days one persisted trading. 12 Day trading presents similarities with some types of gambling, mainly with online and skill-based gambling.…”