Finally the government is taking action against these companies. Think about it, these guys provide the ability to wager on the outcome of a basket of performance statistics. The government is totally right to classify this as gambling and not skill based wagering. Plus, these things have no underlying value at all, just structured binary outcomes based totally on short term results.
What other institution in America is allowed to create non-collateralized chance options markets out of thin air and float them to the public? This is unprecedented. These guys are clearing millions. Could you imagine what woild happen ifit was billions or trillions? I bet that would make for a pretty volatile environment.
The sports analogy for buying a huge public company's common stock is buying a season ticket. The season tickets are relatively liquid compared with actual team ownership and the value rises and falls with how well managed the team is and how popular the league is overall.
If you bought a NE Patriots season ticket in 2000 and sold it in 2010, you made a pretty penny and you hopefully enjoyed 8*10 NFL games with your friends/family. If you bought a Tennessee Titans season ticket 10 years ago, you can't name your selling price today, but it is still worth hundreds of dollars.
do season tickets never expire? that's pretty neat.
I've never thought to look in to how a season ticket actually works, the stock comparison is an interesting one and puts them in a different perspective for me.
Basically, season tickets tend to come in two flavors...
For teams with rather low demand (Like, say, southern NHL teams, and most (all?) baseball teams), the season ticket represents a significant discount over single game tickets, and generally are relatively easy to acquire - I had Carolina Hurricanes tickets for a few years, and by the time you add up the steep discount on the tickets themselves, flat rate parking pass (Not included, but again, a steep discount), and not paying any Ticketmaster/"Convienence" fees, it cost me less than half (on a per game basis) what buying single game tickets would cost.
At the other end of the spectrum, you have high-demand teams that sell out 99.9% of games, like most Canadian NHL teams, and many NFL teams. There, practically all seats are held by season ticket holders (whose annual season ticket price is usually the same as, or sometimes even HIGHER than (hypothetical, generally not available) single game ticket pricing), and where the "rights" to a season ticket can trade for lots of $$$ (thousands) on the secondary market.... you can't just buy tickets, you have to buy an existing ticket holder's account, essentially. A bit like taxi medallions in NYC.
Additionally, season ticket holders usually have preference to purchase season tickets for the next year, and the next. Then along come the secondary markets and what seems like easy profit if your team improves.
The difference is gambling is zero sum. For everyone that gains, someone else loses. In fact these games are negative sum, since the middleman takes a hefty profit for himself. These games have negative expected value, but use tons of clever psychological tricks to make people think they don't. Humans aren't perfectly rational after all. We evolved on the savannahs of Africa, not in a Casino.
How is this untrue in the market? Especially options. Someone is on the other side of this as they aren't based on created value. If someone lays out a huge short, it is priced by the likelihood that company goes down, in the event it does in fact go down, either the underwriter or whoever bought calls pays, either directly or indirectly.
Also, in the broader market. I don't think it still resembles the, "company with solid fundamentals needs cash for expansion" model, where investors participate in the companies growth because they believe in the product.
If there were no markets, then trade would be really inefficient. Prices would be higher, they would fluctuate more. If there was no fantasy football, the world would be a better place.
While humorous, this is nonsense, and a complete mischaracterization of what a stock market actually is.
A stock market is a place where a group of businesses are able to offer ownership stakes in their company in exchange for cash.
The fact that people have built a speculation market around it is very different than a gambling wager. If you buy stock and it decreases in value, you still own the stock.
Edit: As CPLX points out below, in reference to a derivative market, the point is much more valid.
My assumption was that he was talking about derivatives and synthetic securities (i.e. "non-collateralized" as he said). If that's the case his analogy is actually quite reasonable.
I am talking up structured financial instruments like that. Obviously, DraftKings doesn't map perfectly to etfs and options, but i think the analogy stands.
To be clear, I think that skill based wagers should be allowed. I was begging the question, is there a difference here, and it is:
It is a lot better known how the outcome of a football match will be determined than other fin. products.
Football is pretty discrete and doesn't have a broad impact on soccer outcomes (unless you are not American the soccer === football)
This is discretionary capital and not investment money.
So, my sarcastic point was: thanks for protecting me from having fun with $20 i earned weekly, don't you have anything else you might want to look into?
You don't think the stock market maps perfectly to real world markets? Average investors need nano-second liquidity. Hedgefunds help the price stay consisten so that when a massive order comes in it goes into a blackpool and is split up, that way the price isn't off by 0.001% which in my opinion, is well worth destabalizing tge global economy.
I mean, prices are just information, don't we want that information to be a meaningless and irrelevent measure? Luckily, equities prices are well known to be irrelevent to investors.
a well known fact that price was dropped from standard metrics several years ago in favour of popularity.
What other institution in America is allowed to create non-collateralized chance options markets out of thin air and float them to the public? This is unprecedented. These guys are clearing millions. Could you imagine what woild happen ifit was billions or trillions? I bet that would make for a pretty volatile environment.