Investment and Speculation – A new form of Gambling?
BACKGROUND: The concept of speculation is in an intermediate position between investment and gambling because it shares characteristics with each of these concepts. Compared to investment, speculation generally refers to activities in financial markets that are typically short-term, with higher risk, and primarily focused on monetary profit without consideration for the fundamental value of the asset. There is a wide variety of investment products. The concept of Gamblified Investment Products (GIP) includes High-Frequency Stock Trading (day trading), where stocks are bought and sold on the same day with the aim of immediate profit, and investment in High-Risk Derivatives, a market based on contracts whose value depends on the cost of an underlying asset. In recent years, there has been growing concern about cryptocurrency trading, a new form of GIP. Cryptocurrencies are digital assets designed for virtual transactions without central administration. Cryptocurrency trading is estimated to be the fastest-growing market worldwide.
METHODS: We conducted a literature review using the PubMed and Google Scholar databases on the evidence regarding the relationship between investment/ speculation and conventional gambling and the negative impact of the gamblification of investing on mental health.
RESULTS: There is evidence that the majority of speculators or high-risk investors are involved in traditional forms of gambling (Arthur and Delfabbro, 2017; Delfabbro et al., 2021; Mills and Nower, 2019). There is also evidence that rates of problematic gambling and gambling disorder are significantly higher among speculators (4.4% of investors meet criteria for compulsive gambling and 3.6% for problematic gambling - Cox et al., 2020). According to a survey of UK residents, 31% of participants invested in cryptocurrencies as a form of gambling (Financial Conduct Authority, 2019). Data from the US Securities and Exchange Commission suggest that most traders lose all their money within one year (Carlson, 2021). The EU financial regulator suggests that 74-89% of traders lose money annually (ESMA, 2019). There are studies demonstrating higher rates of depression, anxiety, and other dependencies in problematic traders, especially individuals engaging in both high-risk stock market investments and cryptocurrency investments (Grall-Bronnec et al., 2017; Mills and Nower, 2019). However, only a minority of these individuals seek treatment (Granero et al., 2012).
CONCLUSIONS: Just like pathological gambling, high-risk investments are associated with numerous social and financial consequences and can have a significant negative impact on mental health. Current evidence supports the idea that certain trading patterns can be considered a form of gambling. The development of prevention strategies is imperative (e.g., through promoting financial literacy in the general population and regulating marketing content that promotes participation in these activities).
