Is investing in the stock market just like gambling in a casino?

Sometimes it can seem like it because investors and gamblers increasingly use a lot of the same language. That's on purpose, especially on the part of the operators of prediction markets that have only gained regulatory approval to operate in the United States in recent years. The prediction market operators wanted their product to be regulated as a financial product and not as a gambling concern that could limit their growth.

In a preprint version of a paper that will be published in the American Business Law Journal next year, authors Nizan Geslevich Packin, Maya O. Shaton, Elior Sulem, and Sharon Rabinovitz used Large Language Model tools to analyze public records that capture how prediction market operators presented their business to federal regulators to gain their approval.

Here's an excerpt from the paper that explains why the prediction market operators used language to influence regulators and describes how their word choices supported their efforts:

Participants in notice-and-comment processes do not speak randomly. They select terminology and frames they believe will resonate with regulators. In markets characterized by legal ambiguity, this framing becomes especially salient. Describing an activity as “hedging,” “price discovery,” or “risk management” situates it within financial regulation. Describing the same activity as “betting,” “wagering,” or “gaming” situates it within gambling law. Framing therefore operates not only as persuasion directed at agencies, but as a mechanism for shaping the administrative record that courts later treat as the factual predicate for review.

Here's the authors' main findings describing the framing of the words used by the prediction market operators to gain regulatory approval for their businesses as financial institutions, taken from the paper's abstract:

The analysis reveals a pronounced asymmetry: of 812 submissions, 87.2% addressed economic, financial, or regulatory consequences rather than gambling-related characteristics, employing terminology central to financial discourse. Only 5.8% emphasized gambling risks or entertainment dynamics, with high-confidence gambling terminology, with the remaining 7% mixed or neutral.

The initial success of prediction market operators in getting regulated under U.S. financial regulations rather than state gambling laws raises a different question. What makes investing different from gambling?

Schwab's Jonathan M. Craig tackled that question, noting their similarities before identifying the thing that really makes them different:

What investing and gambling have in common is that they both involve risk, and both have potential for gain or loss. But they are not the same—gambling is a game of chance, typically involving short-term bets on binary outcomes. Investing, in contrast, is often a longer-term strategy based on research and data aligned with risk tolerance and financial goals with the aim of acquiring a diversified set of assets that have the potential to appreciate in value and ultimately build wealth for the investor over time.

And to be clear, they have very different expected returns. Studies published by the CFA Institute showed that:

1. Over time, gambling always has a negative expected return. In casinos, the built-in mathematical “house edge” reliably leads to a transfer of money from players to the casino. In the long run, the house always wins.
2. Investing, on the other hand, is the allocation of capital to a business or asset with the expectation that it will generate income or appreciate in value. Over the past century, investments in stocks and bonds have reliably yielded positive returns. However, keep in mind that the past performance of any investment is not a guarantee of future returns or profits. In the long run, it is possible for both investors and the issuers of securities to earn a positive return.

So where do prediction markets really fall on the investing or gambling spectrum? Should they be regulated like brokerages or as gambling operations?

These questions have been taken on by several courts in cases involving the prediction market Kalshi after it began offering "sports event contracts". The courts have been finding Kalshi has crossed a regulatory line that pushed it into the gambling category, where it must be subject to state level gambling regulations:

The 2nd Circuit denied requests Tuesday (Nov. 3) from Kalshi and Coinbase to block state enforcement while their appeals proceed. The order covered Kalshi’s cases against New York and Connecticut officials and Coinbase’s separate Connecticut case. In the two-sentence order, the panel said the companies had “failed to make the required showing” to justify an injunction pending appeal.

A day later, the 9th Circuit declined to rehear its August decision allowing Nevada to enforce its gambling laws against Kalshi’s sports contracts. The August panel concluded that the sports contracts fell outside the federal definition of swaps, leaving Nevada’s gambling rules applicable. According to the court, no judge called for a vote on rehearing by the full court.

In September, the 6th Circuit cleared the way for Ohio and Tennessee to enforce their laws. It concluded that Kalshi had failed to show its sports contracts qualified as swaps and that, even if they did, federal law would allow the states to enforce their gambling laws.

The Commodity Futures Trading Commission said the Commodity Exchange Act gives it exclusive authority over swaps traded on federally registered exchanges. The dispute turns on whether contracts that pay out based on a game’s outcome fall within the federal definition of a swap and whether the statute displaces state gambling laws as applied to those contracts.

Here's a different question. Does that increasing risk to being regulated as a gambling operation by states make prediction markets a good investment?

That's still an open question, but we do have one interesting data point for it. Online gambling platform DraftKings opened its own prediction market in December 2025. In November 2026, the company reported the high costs of building up its prediction market features is cutting into the company's profits, which in turn, is negatively impacting stock price (NASDAQ: DKNG).

Here are two exit questions. Is that short term pain that will lead to a long-run gain for DKNG investors? And if long-run outcomes is what separates gambling from investing, what amount of time has to pass before the long-run gets here?

References

Packin, Nizan Geslevich and Shaton, Maya O and Sulem, Elior and Rabinovitz, Sharon, Finance or Gambling? Prediction Markets After Loper Bright and the Administrative Record (February 28, 2026). American Business Law Journal (forthcoming: 2027), Volume 64 Issue 1., Available at SSRN: https://ssrn.com/abstract=6900983 or http://dx.doi.org/10.2139/ssrn.6900983.

Image Credit: Microsoft Copilot Designer. Prompt: "An editorial cartoon of a bull and bear who are trying to decide if they are in a casino or a stock exchange".

For the first time since President Donald Trump announced his "Liberation Day" global tariff scheme on 2 April 2025, the combined value of goods exported from the U.S. to China and imported by the U.S. from China has exceeded its pre-tariff war level.

According to international trade data tracked by the U.S. Census Bureau, the total value of goods exchanged between the U.S. and China in September 2026 was $41.1 billion. That surpasses the nominal $40.8 billion figure recorded back in March 2025. It is important to recognize these are nominal data figures, with no adjustment for either inflation in the value of the specific goods being traded between the U.S. and China or seasonality in the data.

The following chart shows September 2026's combined trade value figure, which is 14.7% higher than what was recorded a year earlier, along with the trailing twelve month average for the combined US-China trade figures, which helps address the seasonality in the monthly data. The chart also presents a counterfactual projection for what trade between the U.S. and China would reasonably have looked like based on its pre-global tariff war trend.

Getting deeper into the import and export data, September 2026's trade data breaks down as follows:

• U.S. Exports to China: $9.6 billion
• U.S. Imports from China: $31.5 billion
• Combined Value: $41.1 billion

Here's is the import and export value data from March 2025 (before the Liberation Day tariffs were announced):

• U.S. Exports to China: $11.5 billion
• U.S. Imports from China: $29.4 billion
• Combined Value: $40.8 billion

The United States' trade deficit with China has increased since the Liberation Day tariff announcement. That's partly attributable to the difference in each nation's relative economic performance. China has experienced sluggish economic growth, characterized by weak domestic demand, which also lessens the economy's demand for imports. Economic growth in the U.S. during this period has been stronger, driven by the AI technology boom. That boom is responsible for much of the U.S.' increased imports from China, as U.S. domestic production of advanced information technology products is not able to support the increased demand by the economy's information technology sector.

At the same time, we estimate the combined value of trade between the U.S. and China is about 37% less than it would otherwise have been without the global tariff war between the U.S. and China. That estimate is based on the difference between the no-tariff war counterfactual and the trailing twelve month average of the value of goods exchanged between the U.S. and China.

What can we say? International trade is complicated.

References

U.S. Census Bureau. U.S. International Trade in Goods and Services (FT900). U.S. Trade in Goods with China, Not Seasonally Adjusted, Nominal Figures, Total Census Basis. [Online database]. Accessed 5 November 2026.

Image Credit: Currency collection featuring United States and Chinese banknotes. Photo by Eric Prouzet on Unsplash.

Younger and older teens saw a split in their job fortunes in October 2026.

Americans Age 16 and 17 saw their seasonally adjusted numbers among the employed increase for the third consecutive month, with 2,028,000 counted as having jobs. It was the first time since March 2026 that the number of working teens reach 2 million or higher as the employment situation younger teens finally appears to be improving after a prolonged downtrend.

Younger teens have seen a better than quarter-million seasonally adjusted increase in their ranks of the employed since bottoming in July 2026.

By contrast, older teens, Age 18 and 19, saw their employment ranks decrease by 90,000 from September 2026's level. Some 3,466,000 members of the older teen demographic were employed in October 2026. Unlike younger teen however, older teens have been seeing their numbers see-saw between 3.4 and 3.6 million since June 2026 as their employment levels have been relatively stable.

The following pair of charts shows the monthly seasonally adjusted data for the working teen demographic from January 2020 through October 2026.

Image Credit: Work Projects Administration Poster Collection, Public domain, via Wikimedia Commons. Original source: National Youth Administration of Illinois. "Get the Facts about Occupations - Free Classes for Young Men and Women 16 to 25 years". This image is in the public domain and is available from the United States Library of Congress's Prints and Photographs division under the digital ID cph.3f05219. We cropped the image for this article.

The S&P 500 (Index: SPX) was heading for a good week. The stock market appeared to react well to news of the Democratic party's sweeps of many elections across the U.S. on Wednesday, 3 November 2026. The index was up almost 1.6% on that news, which seemed contrary to what might be expected for the biggest companies in the index, the Big-AI tech giants, because many of the winning candidates opposed building the data centers they need to support the boom in Artificial Intelligence technologies.

Then Thursday, 5 November 2026 came and the crash that seemed like it should have happened on Wednesday arrived like a ton of weights. It was as if investors suddenly realized that yes, the political party that specifically ran against AI technology development had won power at the federal, state, and local levels of government and would follow through on imposing new regulations and other costs on the AI tech giants. The S&P 500 plunged almost 4.6%, led by AI chipmakers like Nvidia (NASDAQ: NVDA), Micron Technology (NASDAQ: MU), and Advanced Micro Devices (NASDAQ: AMD.

Then Friday arrived and the investors who like to pick through the carrion of market carnage to find deals on heavily discounted stocks found enough among the AI tech sector to boost the index by a little over 0.3% on the day. For the trading week as a whole, the S&P 500 closed the week at 7,376.86, down almost 2.7%.

So what happened on Wednesday to delay the expected drop in stock prices by a day?

The answer turns out to be pretty technical, and to give credit where it's due, Zerohedge provided some of the better reporting of what happened on the day it happened, compiling observations from several sell-side analysts for why the market bounced up instead of realizing the expected drop:

1. Clarity - the event is passed and Trump "absolutely willing" to accept the results and a 'medium bad' outcome for Republicans
2. Gridlock - lowers the risk premium. Dem majority plus Trump’s willingness to work with it “should act as a break on extreme policy outcomes and bring down risk premia” - DB Saravelos.
3. Plunging Oil - recognition of Iran War as reason for Dem Sweep, Trump confirmed he wouldn't escalate in Iran any time soon, and "expect Dems to use fiscal deadlines to seek to limit the war with Iran" - GS Hatzius
4. Hopes of Tariff Rollback - "...roll back selected tariffs, and reverse spending cuts enacted last year." - GS Hatzius, and it fits who led today with AAPL/MSFT surging as investors perceived the stock as a winner from the Democratic sweep.
5. Hedges Unwound - deeply in the money protection was sold (driving down vol and sparking the heavy delta/gamma flow-driven rebound)
6. Technicals - NDX bounced off its 200DMA
7. Rotation - Money is moving out of AI CapEx (on worries that Democrats will regulate AI more) and into cash-generating MegaCaps.
8. Seasonality - 6 months after the past 19 midterm elections, SPX higher 100% of the time, with an average gain of 14.18%.

We are sure there are more (obviously aside from the classic 'relief rally' argument), but those all seemed to add up to what we saw today...

It was enough to last for a day. And then the Thursday, 5 November 2026 AI Crash happened, where we're now wondering if stock prices are themselves experiencing a regime change. That possibility is hinted at in the latest update, where we find the trajectory of the S&P 500 has dropped well below the range we would expect to find it when investors are focused on the current quarter of 2026-Q4 in setting current day stock prices.

It's too early to tell using the dividend futures-based model since we have to identify potential changes in market regime from observations. On one hand, we have a Lévy flight event where the trajectory of the index has broken away from all of the alternative trajectories it would be expected to be found in the established market regime that's been in place since 28 April 2025. On the other hand, we see that trajectory is on par with where the model would put it in early December 2026, assuming investors are still focusing on 2026-Q4.

The difference between the model's projections in November 2026 and December 2026 could be attributed to how its projections work. Here, its projections a month into the future are "locked in", while its projections of the more distant future are still dynamic and can adapt and provide accurate predictions assuming the existing market regime still holds.

We'll find out which scenario applies in the weeks ahead as investors absorb the random onset of new information from the newstreams. Like those they absorbed from the market moving headlines of the week that was.

Monday, 2 November 2026

• Signs and portents for the U.S. economy:
• Manufacturing solid but strain of energy costs, supply disruptions starts to show
• Oil drops over 4% on hopes of progress in talks on ending US-Iran war
• Trump says US, Canada have 'concept' of a new trade deal
• China's slow buying of US farm goods tests $17 billion trade pledge
• Fed minions fear inflationary impact of El Nino:
• El Nino poses 'meaningful risk' of higher inflation in 2027, SF Fed paper says
• Bigger trouble developing in China:
• Beijing To Convene Stock Market Rescue Meeting As Plunge Protection Goes Into Overdrive
• China's top three airlines head for full-year losses as fuel costs weigh
• Bigger trouble developing in Japan, South Korea:
• Japan's October factory growth slows as costs pick up, PMI shows
• South Korea factory activity growth slows to 8-month low, PMI shows
• EU minions dismayed by EU trade with US and value of AI companies. Also getting excited to hike Eurozone interest rates in December:
• Euro zone countries are integrating faster with US than with each other, ECB says
• ECB flags AI valuations, bond stress and fund losses as main risks
• AI-related debt binge may pressure European bond markets
• ECB will have to raise rates again, extent uncertain, Kazimir says
• Nasdaq, S&P 500 fall behind ahead of U.S. midterms, key earnings results
• S&P 500 ends down; Apple dips ahead of quarterly report
• October delivers S&P 500 equal-weight stocks' biggest outperformance since 2009

Tuesday, 3 November 2026

• Signs and portents for the U.S. economy:
• US job openings jump in September; layoffs lowest in 1-1/2 years
• US manufacturing strengthens in October, input prices stay high
• US factory orders beat expectations in September amid broad strength
• Trump says US close to trade deal with Canada, Carney says work remains
• Oil prices ease to settle near 4-week low on hopes peace talks will end wars
• Bigger trouble, stimulus developing in China:
• China regulator tells banks to pause IPOs, FT reports
• China halts listings in bid to bolster struggling markets
• Beijing's Stock Rescue Turns More Desperate: Regulators Reportedly Halt IPOs
• AI investment is becoming overly concentrated, Chinese official says
• BOJ minions getting excited to hike Japan's interest rates again in December:
• BOJ locks in December hike, but neutral-rate uncertainty muddies outlook
• ECB minions lining up behind December interest rate hike in Eurozone:
• Bundesbank's Nagel joins ECB chorus backing December rate hike
• S&P 500, Nasdaq end higher as markets weigh on U.S. midterms
• Nasdaq ends higher as AI heavyweights rebound ahead of midterm results
• AMD forecast eases AI spending fears as data-center sales surge

Wednesday, 4 November 2026

• Signs and portents for the U.S. economy:
• Mortgage rates drop for the third straight week, but homebuyers are still leaving the market
• McDonald's US sales decline for first time in six quarters despite value push
• Oil rises on Iran war uncertainty after Trump's Republicans face election rout
• US to loan about a third of heating oil reserve in bid to tame prices
• Bigger trouble, stimulus developing in China:
• China's services growth slows to three-month low as confidence weakens
• ECB minions getting excited again to hike Eurozone interest rates, predict wages in Eurozone will rebound next year
• ECB rate hike looks nearly certain after inflation rises to three-year high
• Euro zone wage growth to rebound slightly next year, ECB says
• Dow has best day in 1.5 years as traders assess a Democrat sweep
• Wall Street ends higher after Democrats win Congress; data center stocks tumble
• Democrats' midterm sweep fuels $750 billion Big Tech rally
• US Democratic win unlikely to ease firms' cost, tariff woes in near term, executives say

Thursday, 5 November 2026

• Signs and portents for the U.S. economy:
• US weekly jobless claims at 57-year lows; worker productivity surges in third quarter
• US worker productivity surges in third quarter
• China says US farm purchases hinge on tariff-cut deal
• Brent crude jumps, settles up over $3 after tanker attacks
• Fed minions want to go slow on U.S. interest rate hikes:
• Fed's Hammack, Barkin favor gradual rate-hike path to lower inflation
• Growth signs developing in Japan:
• Japan services activity expands for fifth month, PMI shows
• ECB minions getting excited again to hike Eurozone interest rates again:
• ECB's Lagarde says data will tell if December rate hike needed
• Nasdaq ends -5.5%, S&P 500 sees worst day since April 2025
• Wall Street fear gauge jumps most since 'Liberation Day' as AI trade stumbles
• Nasdaq posts biggest daily drop in 19 months on fears of AI regulations
• AI storm dooms tech stocks to $2 trillion decline on darkest day since 2025
• NVIDIA drops 9%, now down for 2026

Friday, 6 November 2026

• Signs and portents for the U.S. economy:
• AI rout sets off market alarm signals as traders brace for what's next
• Democrats planning flood of AI bills when they take control of Congress
• US labor market regains ground as job growth surges, unemployment rate falls to 4.1%
• Four things to note from Friday's US jobs report
• VIEW Strong October jobs report sends yields higher
• Brent oil price benchmark set for biggest weekly drop since 2020
• Soaring freight rates give US refiners edge as crude discounts widen
• Fed minions expected to deliver quarter point rate hike in December 2026, say they don't care about AI tech stock crash:
• Fed seen sticking to December rate hike after jobs data
• Daly says Fed rate hike likely, despite 'painful' tech-stock dive
• BOJ minions have a fever, the only prescription is more rate hikes, at least until they hit a two percent yield:
• BOJ to hike in December, seek terminal rate of 2%, says ex-central bank top economist
• S&P 500 reports weekly losses as technology rout weighs on markets
• Nasdaq rebounds 1% following worst session in 18 months as traders snap up tech shares

The CME Group's FedWatch Tool sees just two more increases in the Federal Funds Rate in the weeks ahead. It continues to anticipate the Fed's next rate hike will be a quarter point, coming on 9 December (2026-Q4). The other rate hike the FedWatch tool foresees would be another quarter point increase that would take place on 17 March (2027-Q1).

The Atlanta Fed's GDPNow tool projects the current quarter of 2026-Q4's inflation-adjusted economic growth rate will be +3.4%, up from its initial estimate of 3.2% a week earlier.

Image credit: Microsoft Copilot Designer. Prompt: "An editorial cartoon of a Wall Street bear who has set a balloon labeled 'AI' on the ground and is trying to crush it with several large weights that say 'REGIME CHANGE' and 'NEW REGULATIONS' and 'HIGHER COSTS' and 'LOWER PROFITS'".

A crime has been committed. The cops think they know who did it, but they don't have enough evidence to make the case. Unless they can get the suspect to confess, they're not going to. They've tried almost all the tricks of their trade to get them to admit they did it, but have come up empty. They're down to their last trick.

It's time to turn to the supernatural. They put the suspect in a darkened room and make them wait, alone. After enough time has passed, a panel in the wall quietly opens, revealing a skeleton with glowing red eyes. Blue lights flash and a voice emanates from the surreal inquisitor. It demands the suspect confess. And the suspect, scared out of their wits, does. The police have their confession, which they've filmed and recorded for use in a court of law. Case closed.

Or at least, that's how Helene Adelaide Shelby imagined how a confession might be obtained when she filed a patent for her invention of an Apparatus for Obtaining Criminal Confessions on 16 August 1927. Here's an excerpt from U.S. Patent 1,749,090, which she was finally awarded on 4 March 1930:

The present invention relates to a new and useful apparatus for obtaining confessions from culprits, or those suspected of the commission of crimes, and photographically recording these confessions, in the form of sound waves, in conjunction with their pictures, depicting their every expression and emotion, to be preserved for later reproduction as evidence against them.

The primary object of my invention is the provision of an apparatus for the creation of illusory effects calculated to impress the subject with their being of a supernatural character and to so work upon his imagination as to enable an inquisitor operating in conjunction with-the recording system to obtain confessions and graphically record them by light action under the control of electric impulses governed by varying intensities of sound waves....

My apparatus for obtaining confessions of guilt from criminals undergoing examination comprises a novel combination of well known elements, arranged in such manner and combination as to produce, when operated, a state of mind calculated to cause him, if guilty, to make confession thereof, the apparatus further operating to record photographically his every expression and emotion, while, at the same time, simultaneously recording his examiners questions and the replies thereto.

The illustrations from her patent reveal the secrets of the supernatural character she envisioned, "a figure in the form of a skeleton", with eyes lit by red lightbulbs to emit "an unnatural ghastly glow":

There's a movie camera rigged up to peer through the nose of a skeleton that's been propped up and cinematically lit behind the sliding panel to the suspect interrogation room to be as spooky as possible. A megaphone transmits the police interrogator's voice while a microphone records the verbal communication, fully synchronized with the film of the suspect and permanently recorded to be projected with sound on a screen later.

That recording system may be the most remarkable aspect of the patent. When Helene Adelaide Shelby filed the patent in August 1927, it was the era of silent films. It wasn't until October 1927 that The Jazz Singer would be released to movie theaters to become the first "full-length" movie production to feature fully synchronized dialogue spoken by its actors on screen. It used the Vitaphone system, which played a wax disc recording of the movie's sound in sync with the film's scenes.

Shelby's invention, on the other hand, appears to utilize a system similar to the Movietone sound system, a sound-on-film technology that was just starting to be used in Hollywood at the time the patent was filed.

Alas, we couldn't find any record of any police department utilizing Shelby's invention. Nor could we find any record of such a system being used to obtain a criminal confession. Not even in the movies.