alt Hacker NewsClearly the problem in all of this is that these markets are rigged. Imagine if the most knowledgeable investors were banned from trading stocks, or had artificially low bankrolls. It wouldn't be practical for individuals to invest in the market because everyone would assume they were getting ripped off, and the price was totally separated from the value of the business.
The fact that the most successful investors have the largest effect on the price is exactly what makes the market fair. A layman can login to manage their 401k, put in a market order, and know they are getting a fair price because many people, much more knowledgeable than the layman, are competing to set the price.
The difference between a betting company the stock market is that in the stock market you have regulation to separate the exchange from the market maker. So in the stock market you go to the exchange, you buy or sell at the market price (or place an offer in the book) the exchange takes a commission but you're trading with a 3rd party. In the gambling world that generally doesn't happen, the exchange and the market maker generally are the same person - and there's good reason for that, if you can do it it's a better business model.
But either way, the same effect occurs. The sharks in the stock market profit from making good trades and in order to account for that the market makers have to quote a wider spread in the book, which effectively means the retail trader pays a larger spread. The net effect is money transfer from the retail trader to the smart trader. Would it be better for the market maker to just refuse to trade with the smart trader and then give the retail investor a better spread? Welcome to payment for order flow. Could a smart investor pretend to be a retail trader and get some good trades through Robinhood? Maybe, that's pretty analagous to what these guys are doing.
These are different mechanisms for the same thing but I'm not certain one is clearly morally superior.