When investing feels like gambling: How app-based trading blurs the line

App-based trading is turning investing into a high-speed thrill ride. Tools like zero-day options, leveraged ETFs, and meme coins let young investors chase fast gains, but the line between smart investing and gambling is disappearing, as noted in a Bloomberg article. 

Young investors are using mobile apps to trade quickly, blurring lines between investing and gambling.

This trend is fueled by tools that encourage gambling-like behavior, which make markets faster, riskier, and more speculative.

Since the pandemic, app-based trading has surged, blending investing and gambling with tools like zero-day options (0DTE), leveraged ETFs, event contracts, and memecoins. 0DTE now makes up over half of S&P 500 daily options, leveraged ETF assets have jumped to $240 billion, and prediction markets like Kalshi saw $507 million in NFL-week trades, reflecting Wall Street’s push for faster, higher-stakes trading.

As a result, regulation faces the problem of distinguishing between what constitutes investment and what constitutes gambling.

During Biden’s administration, the Commodity Futures Trading Commission (CFTC) tried to ban election- and sports-related contracts, but Kalshi and PredictIt challenged this, arguing their products help hedge risks and forecast outcomes. 

Under Trump, the Commodity Futures Trading Commission reversed course, allowing PredictIt and ending the dispute with Kalshi, highlighting how the line between investing and gambling is increasingly unclear.

Historic context 

Speculative trading has a long history. Late-1800s bucket shops let people bet on stock prices without owning shares, often leading to ruin and prompting the creation of the Securities and Exchange Commission after 1929. 

Deregulation waves fueled booms and busts, from 1990s internet stocks to the 2008 housing crisis. 

Today, fast, flashy tools like meme-stock rallies, crypto runs, and event contracts make speculation easier and more engineered, often favoring sophisticated traders over casual participants.

How to distinguish investing from gambling

• Seton Hall law professor Ilya Beylin suggests a way to distinguish investing from gambling using the formula P = E – C + M (effect = expected value – cost + psychological experience). If a trade is driven by potential financial return, it counts as investing; if the thrill is the main motivator, it’s gambling. 
• For example, buying and holding Nvidia shares is investing, while rapidly trading leveraged ETFs is closer to gambling.

Investors are often drawn to high-risk tools not just for potential gains, but for the thrill and the illusion of control. Nobel laureate Daniel Kahneman showed that even professional investors are frequently fooled by randomness, seeing patterns where none exist. 

This psychological pull helps explain why instruments like zero-day options, leveraged ETFs, and meme coins are so appealing.

Many distinctions between investing and gambling blur under scrutiny. Disciplined gamblers can sometimes have an edge over casual investors.

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