Why Comparing Crypto Trading to Gambling is Economic Bigotry

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There’s no question that over the past two years public interest in cryptocurrency has skyrocketed and both retail and institutional investors are jumping into the market with increasing confidence. This new market participation has led to increased engagement in cryptocurrency and blockchain technology, which is much needed as we begin the transition to Web 3.0.

However, despite the accelerating expansion of the crypto community into the mainstream, the skeptics and the uninformed have continued to liken investing in crypto to gambling – implying that it is high-risk and without skill compared to investing in traditional assets. This comparison brings an unwarranted and unhelpful connotation that is rife with economic bigotry. This economic classism pervades popular media and deters curious onlookers, those who have historically been left behind by traditional finance, from potentially benefiting from one of the greatest investment opportunities of this generation. Just as higher education used to be considered ‘unsuitable’ for women and the few existing ‘women’s colleges’ were seen as inferior, so investments like crypto that are available to everyone are often denigrated.

CLASSIST CONNOTATIONS: INVESTING VS GAMBLING

When a wealthy person speculates on a risky asset, it’s called investment. When a low-income or working-class person does the same, it’s called gambling. Why?

Hidden within this distinction are prejudice, classism, and economic bigotry. Historically, the lack of financial and educational resources has barred working-class citizens from traditional investment markets, while the wealthy have used their access to these resources to invest and increase their wealth at a disproportionate rate.

Investing comes with risks, but the notion that only the wealthy are able to discern which risks are worth taking and hence determine what qualifies as sound investment theses is laughable. This connection implies that financial decisions made by those with established wealth are the standard and that those who wish to grow their wealth should comply with this standard. That many of these investments are only available to the wealthy (such as venture capital funds) seems not to matter. It also denigrates the investment tactics more accessible to the average person, such as buying and trading crypto. Speculating by the wealthy is called “investing” and is underwritten by the idea that their wealth demonstrates a superior understanding of speculation. Conversely, those of the lower socioeconomic classes looking to grow their wealth do not have the assets to back up the legitimacy of their investments.

While some try to steer the poor away from ‘risky’ crypto investments, these markets represent a unique opportunity usually not so democratically available. Unlike traditional investing, the decentralized nature of the crypto market allows investors of all walks of life equal opportunity to participate. The markets offer a singular chance for historically marginalized groups to grow their wealth. According to a 2021 survey published by the University of Chicago, more than 1 in 10 Americans invested in cryptocurrency from 2020 to 2021. Among crypto traders, 41% are women, 44% are investors of color, and 35% have incomes below $60,000 a year— higher respective shares than the 38%, 35%, and 27% of those who traded stock. Despite the potential positive impact crypto trading offers these communities, their increased participation and historical lack of substantial wealth has incensed the classist narrative that their legitimate pursuit of wealth amounts to gambling.

In reality, gambling itself is a pejorative that illustrates a commonplace, yet extremely dangerous, illusion that traditional investing is somehow immune to loss.

CRYPTO & TRADITIONAL ASSETS ARE MORE SIMILAR THAN YOU THINK

Upon inspection, the similarities between crypto assets and traditional assets vastly outnumber their differences. For instance, ownership of stocks today has an entirely different meaning in a world of zero dividends. There are non-voting share classes, cheap debt markets for corporations, and asset inflation that is outpacing the flaccid growth in wages. Ownership of stocks today, for the vast majority of stockholders, amounts to one right: the right to sell.

CHANGING THE NARRATIVE

Ultimately, the crypto market has the opportunity to expand its audience in ways the traditional financial markets have failed to. Many crypto and blockchain platforms are currently working to ensure everyone has equal access. It is clear that the traditional financial industry often alienates everyday investors, and with the creation of cryptocurrency and blockchain technology, we have the opportunity to break down economic barriers and invite a new class of investors into the global economic system.

But in order to ensure optimal access and participation in this ever-evolving system, we must deconstruct the classist narrative surrounding the crypto market and its everyday investors. So, as a first step, I ask you to ponder this: If crypto is like gambling, what’s actually more dangerous, participating in a game that you acknowledge you cannot control completely? Or playing a game in which you have the false illusion of control?

Bryan Hernandez is a former founder of Sonar Trading and currently serves as the President and Co-founder of Structure: a global financial platform that opens the door for mainstream investors to seamlessly participate in the DeFi, crypto, and traditional markets.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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