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What is the practical difference in terms of gambling between wagering on the future score of a sporting match and wagering on stock market derivatives based on indices, such as the future value of the SPX (by trading call and put options on the SPX) or the future value of the VIX (by trading VIX futures)? The SPX and the VIX are both metrics; there are no underlying assets other than the price of the option or future itself. Like sports gambling, when one trades SPX options and VIX futures there is only an exchange of money on whether the prediction was right or wrong.

If not, what am I misunderstanding?

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  • Note that indeed, you may not be aware spread betting in the UK, is indeed part of an regulated as part of the UK's gambling agencies! not the UK's stock market agencies!
    – Fattie
    Feb 3, 2021 at 20:19
  • VIX options and futures might be explained as a nesting. See, options and futures are used to hedge physical commodities or equities. But the cost of the options can change which effects the cost of the hedging. So VIX options and futures can be used to hedge the cost of the primary hedging. In fact Black-Scholes option valuations are largely based on volatility.
    – S Spring
    Feb 3, 2021 at 20:21
  • One huge, huge confusion on this page is that: there are two utterly different types of sports gambling. In Parimutuel systems, there is simply "a cut for the house". For example when a casino offers blackjack, simply mathematically there's a small endless win for the house. Same with Parimutuel horse race betting. IN TOTAL CONTRAST there is bookmaking where, literally, the bookmaker is using skill to set a bet and you try to out-skill him. (Exactly like when two friends in a pub "make a bet", so, I say to you "7 gets you 5 that such and such will happen.") ...
    – Fattie
    Feb 4, 2021 at 12:48
  • the two concepts are utterly different and there is total confusion on this page in discussing the issues involved.
    – Fattie
    Feb 4, 2021 at 12:49

3 Answers 3

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The differences are purely cultural and arbitrary distinctions. These are necessary in some cultures and belief systems.

Not all cultures or individuals require a distinction between investing or gambling for any reason. Whether that is feelings of personal responsibility, religion, or maintaining respect in their community.

Not all cultures or individuals require a distinction between a negative expected value financial game, and a positive expected value financial game. Gambling is typically considered to be negative expected value financial games, whereas "not-gambling" is typically considered to be positive expected value financial games. Sports betting has been argued to fit somewhere on the positive expected value side, purely for regulatory reasons. Typically these arguments become pedantic and semantical as the root of arguing a distinction is for feelings of personal responsibility, religion, maintaining respect in a community, and for regulatory purposes.

In the United States, uniquely, "gambling" is regulated at the state level and ignored by the Federal government except to restrict banking of gambling services using interstate systems (the internet - as such, online gambling services that are not reliant on licensed banking systems have no prohibitions). While the federal government regulates securities and the derivatives of commodities (but not the trading of spot commodities). This causes the fairly arbitrary cognitive dissonance to be put at the forefront. As any one individual can play any money game at the state level and lose it all, but be presented with a paternal limiting relationship in positive expected value games such as daytrading and investing.

In other countries, these can be the same or different regulatory agencies, at the same level of government. Instead of dual overlapping governments.

But ultimately the venn diagram of financial games significantly overlaps such that it is almost a circle.

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    This answer is like some sort of zen think-piece. What the hell ?!?! :) The answer to the question acidgate asked (the title) is THERE IS NO DIFFERENCE. IT IS A PROP BET. It is exactly in every way like making a prop bet on "will it rain tomorrow". All of the software and accounting formulations and mechanics are literally the same.
    – Fattie
    Feb 4, 2021 at 18:36
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Day trading derivatives is similar to sports wagering in that the house takes a cut.

Over the long haul (not a short lucky streak), they both require an edge to succeed though I'm not sure that you can find much of an edge with sports betting.

However, derivatives are more complex and they offer you many more ways to hedge as well as offset risk, at the outset and during the bet.

If you extend the time frame from day trading to swing trading (days to weeks or even longer), some uses allow you to mimic longer term investing with less risk but I suspect that's not what you're after.

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  • Interestingly enough, its much, much easier to find an edge sports betting (eg legit arbs are very common all over the place in sports betting for starters, albeit hard to scale up) than in derivatives. Key problem is just that the liquidity for most of these is small in sports so you tend to be battling liquidity constraints constantly, which is basically the reverse of derivatives, where edges are hard to come by but you can get vast sums on .
    – Philip
    Feb 4, 2021 at 14:51
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Sure, they are logically and mathematically exactly the same.

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    Perhaps you are right, but your answer will be much better received and more convincing if you explain why you think they are the same. Feb 4, 2021 at 2:41
  • Ben - fortunately I don't care about those issues :)
    – Fattie
    Feb 4, 2021 at 12:45
  • @BenMiller-RememberMonica - to expand on my previous comment :) I only care about being right. And I'm completely, totally right. As I've already tried to undo some of the total confusion in comments on this page: The answer to the question acidgate asked (the title) is THERE IS NO DIFFERENCE. IT IS A PROP BET. It is exactly in every way like making a prop bet on "will it rain tomorrow". All of the software and accounting formulations and mechanics are literally the same. It's just a prop bet.
    – Fattie
    Feb 4, 2021 at 18:38

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