People actually prefer it this way because investments are taxable income but gambling winnings are not (and gambling is of course legal here).
So you get almost the opposite situation, where spread betting is dressing itself up as financial trading not to deceive the regulators but as a way for people to invest in a more tax friendly manner.
Whether something is really gambling or investment is kind of philosophical. UK regulators tend to use different terms, specifying subcategories.
UK gambling regulations allow anyone old enough to gamble on these exchanges under the same rules as sports betting. If this was classified as financial services, regulations would be a lot stricter.
Anyway, UK gambling winnings are not taxable for consumers. The casino’s cut is taxable (15% of gross), which is transferred directly to the customer via spreads whether they win or lose.
How is that different than trading oil; gold or public stock? If you have ever traded any of those, I'd be willing to wager or invest that if you have, you never took possession of and never really owned barrels of oil; gold bars or even actual stock certificates.
You are most likely to have actually owned stock, but when you get into the real nitty gritty of litigation, you would be very surprised (or not, but many would) how stock trading and ownership actually work.
Which is a complicated way of saying that the share that I think I own actually exists in the world, through an admittedly complicated web of commercial relationships maintained by professionals at regulated financial institutions. It is not simply a bookkeeping entry that my broker made up to take my $2. If I sell it, I will likely end up selling it to an internalizer who pays eTrade for the privilege (Citadel?), rather than a counterparty on a lit exchange, but it still exists. It votes in BoA matters. It receives dividends. It seemlessly transfers when I migrate between brokerages, which I have done twice since buying this share. If I wanted to pay an irrational amount of money to win internet points, I could probably even gain physical custody of an actual share certificate.
If you want to nerdsnipe further about the difference between bucket shops, Bitcoin exchanges, and financial institutions, I am happy to go into this topic in arbitrary depth.
Not to be confused with gambling, where your tokens do not represent your or anyone's ownership of any tangible asset.
Why is this the line between investing and gambling? I might own $1 billion of equities on swap. This is just a bookkeeping entry that my dealer made up to take my money. I don't see how not owning the physical stock suddenly makes it gambling.
The Japanese FX broker, on the other hand, has the odds so firmly stacked in their favour that they have no need to actually do any FX trading (though I expect that they do some). If the margin is high enough, the statistical fluctuations don't matter that much. That's the difference between a brokerage and a bucket shop.
My point is more about ownership (legal vs beneficial). See: https://www.sec.gov/comments/4-537/4537-25.pdf
It would be interesting to seeing a similar legal analysis of ownership applied to bitcoin exchanges (and wallets, bitcoin clients vs mobile).
I am fairly certain nowadays Cede & Company owns 100% of all the stock in all US markets (NASDAQ, NYSE, etc...). But if you believe you own stock that is exactly the type of confusion and uncertainty the markets themselves want the public to believe, at least according to the litigation I am familiar with, but don't take my word, familiarize yourself with the Depository Trust Company (DTC) and Cede and come to your own conclusions about stock ownership.
Of course, go outside the US where the stock markets are less insane, and you'll find plenty of places where direct electronic registration is perfectly normal, such as Australia.
"Example. John Investor purchased 1,000 sharhs of IBM common stock through Meril Lynch, his broker (a DTC participant). John Investor's shares are a small fraction of the total shares deposited in Merrill Lynch's participant account (i.e,,, 10 million), which in turn are a small fraction of the total number of IBM shares represented by certificates held in DTC's vaults live., 100 million). (DTC's entire position (100 million) is represented on IBM's share register under the name "Cede & Co."') After John Investor gave his broker the instruction to purchase the shares, his broker obtained them in the market from one or more sellers, each of which ultimately had its own DTC participant account. To effectuate the trade, DTC reduced the selling participants' accounts by an aggregate of 1,000 and increased Merril Lynchs account by 1,000.
It is important to understand that DTC legally owned those shares both before and after the transaction-it merely shifted them from one account to another."
See: https://www.sec.gov/comments/4-537/4537-25.pdf
But I'll concede the point as Computershare is the actual owner not DTC/Cede, but replace DTC/Cede with Computershare, the ownership principal is the same, Computershare is the legal owner of IMB shares at all times (before and after you buy the stock) you would only become a beneficial owner at any given point.
No - in my case, Computershare is the transfer agent, not a nominee. Computershare is contracted by IBM to actually administer and maintain IBM's share register, in which Cede & Co is listed as the legal owner of a huge chunk of shares, and I'm directly registered as the legal owner of a couple of thousand dollars of shares. Google "direct registration".
I didn't buy my IBM shares through a broker/DTC participant/any other financial institution. In my case, IBM issued the shares directly to me, instructing Computershare to update the share register accordingly.
Street side shares are owned by Cede, but as you mention other non street side shares are directly owned. This includes direct share grants, employee stock purchase plans and dividend reinvestment plans.
(As an Australian, the idea that stock certificates are still something that exists at all for publicly-listed companies absolutely astounds me, but anyway...)
And I will not even go down the rabbit hole of contractual rights, but obviously includes legitimate ideas of economic interest and voting rights, but as the comment above noted about brokers, that is were things get very interesting, because then often times people don't even own contractual rights, or alternatively many party's simultaneously have varying degrees of contractual rights over the same stock (often times leading to factual inconsistencies and legal impossibilities).
Incidentally, Illegal lotteries in the US historically used similar sources of numbers. In their case it was apparently more of a way to guarantee that the drawing wasn't fixed than to present it as legal. [1]
Even worse( or better depending on your perspective ), these "investments" allow you to leverage 100:1 or even 500:1 and while stock market close at 4pm, FX trading is 24/7.
The only ones who can make consistent money are those with insider information. The big banks and their currency trading arms with ties to central banks.
Otherwise, you either get real lucky and win big and never trade FX again or you will get whittled down until you lose everything or you hit a bad spot and lose everything in a second.
I know people who went into FX trading and they couldn't leave their homes because they were monitoring pips. It became an obsession and they all eventually gave up after losing money.
But if you are lucky and at the right place at the right time, you would retire in a few seconds. Like the swiss franc move a few years ago. If you were lucky or "well-informed" and bet the right side, that huge move could have turned your thousands into millions. But those kinds of moves are rare and unexpected.
There are hundreds of stories of people actually getting lucky/good in modern FX bucket shops and not getting all of the money.
I counted cards and did other advantage gambling. They were not poor investments or any more risky than other investment ventures (in fact, significantly less risky in some areas I specialized in). But it was never investing. It was always gambling.
FX/FOREX investments or futures/commodities trading don't count?
(This is a shorthand criticism, but since many HNers might not know it already: pretend you have a country where gambling is mostly illegal. Wagering on the roll of a die is illegal, but people really want to wager, so, you give them "investment" options like "Is the yen going to trade up against the dollar?" While you swear blind that this is investing and that the proverbial Mrs. Watanabe is making informed investment decisions after deeply analyzing the latest market trends, Mrs. Watanabe is actually just depositing yen with you and withdrawing less yen later. She doesn't actually own dollars at any point; she is just "trading" with you. You might not even own dollars at any point. The only purpose of the exchange rate is to be a source of legal random numbers, since a die or deck of cards would be a source of illegal random numbers.)
I haven't used DMM's FX offering but out of morbid curiosity I looked at a Bitcoin exchange which is widely reported to have copied it. It was like Zynga had made a pachinko game with slightly more numbers and less chesty mermaids. There was even a "bloop" sound effect when other people's trades went through.