The Stock Market is Not Gambling 

April 2025 

“Trading stocks is just gambling”, “it’s all one big casino”. Having worked in public markets at an investment bank, I hear this a lot from people. Normally it’s phrased dismissively by people who:

a) Have lost money in the stock market (or know people who have) 

b) Dislike the financial sector and are sceptical of its institutional power 

c) Simply don’t invest nor understand the stock market

There’s some important distinctions worth making: 

Stock markets are positive sum (in the long run), gambling markets are zero or negative sum. 

At the index level, a stock market will tend to make money for everyone who sticks it out. At the poker table, your winnings are necessarily someone else’s loss and can’t be anything more than that. Staying at the poker table longer is not likely to increase your winnings (quite the opposite). Games like blackjack or poker appear zero-sum, but in reality become negative-sum due to a ‘house edge’. Meanwhile the lottery is overtly negative-sum for players. 

Stock markets have a tangible basis, gambling does not. 

Companies derive value from a balance sheet that consists of assets with real, monetary value. That may be real estate, sales contracts, machinery or stock inventories. Even ‘intangible’ assets like brand, goodwill, or IP have a tangible basis because they persist and people are willing to pay for them. The prices of stocks which oscillate daily and make headlines don’t appear to immediately reflect this, but real world assets are the ultimate basis of their value. Gambling is simply the pooling of capital in a defined system which redistributes this capital predominantly on the basis of luck and perhaps with an element of skill depending on the game. The expected value of your initial capital evolves with respect to time and the rules of the game. At no point do you have any legal ownership over anything – tangible or intangible. 

Consider the difference in how they are treated by society: a bank might reasonably back you to raise capital for a company but they would laugh you out the door for asking them to finance your trip to Vegas. Additionally, the taxman will want his CGT on the capital appreciation of stocks you own. Yet, in the UK at least, the taxman will let you walk away with all your casino winnings intact because you’ve generated no taxable value and because he got his cut anyway through various duties on the bookies and casinos themselves. 

Someone might generously settle for a looser definition of gambling along the lines of “risking capital through investment”, which implicates stock investment. But this implies that buying a house or having a pension are gambling, which stretch the semantics to a meaningless conclusion. 

That’s not to say stock trading can never be gambling. Gambling is very much a real subset of behavioural strategies used within the stock market, but it’s not an inherent feature of it. This would be associated with options (especially 0DTE), leverage, meme stocks, and a high turnover of positioning. If you chase stock price highs, expect short term winnings, do no company research and take egregious, unmanaged risk – you’re a gambler not an investor. 

This is all neatly summarised by my favourite quotation regarding the stock market, astutely made by Benjamin Graham: “In the short run, the market is a voting machine but in the long run, it is a weighing machine.” 

It is revealing that the only ‘gambling’ billionaires in the world built companies – stock investment – in the gambling sector. None were sat behind the poker table. If only with $1, to be long the S&P500 is to be long the work of 500 obsessive CEOs, their innovative products and thousands of employees. To be long the S&P500 is, ultimately, to be long human ingenuity. That’s the real ace of spades.