INVESTING VS GAMBLING: What is the difference from an Islamic perspective?
THREAD
In the context of risks, trading and gambling are both regarded as speculative risks. In both trading and gambling, one can profit or lose. However, there are key differences between them.
THREAD
In the context of risks, trading and gambling are both regarded as speculative risks. In both trading and gambling, one can profit or lose. However, there are key differences between them.
1) Gambling is staking of wealth by two or more parties where the winner wins all & the loser loses all. In other words, gambling is winning at the expense of another’s loss. Whereas in investing, counter-parties & shareholders (ordinary shares) collectively gain or lose.
2) Gambling does not involve ownership of underlying assets. It is merely staking your wealth. Whereas trading and investing demands ownership of underlying assets.
3) Payouts or 'profits' in gambling is pegged upon the occurrence of an uncertain event; usually in a ‘yes or no’ proposition or a binary stake. The outcome and profit is a result of one of the propositions occurring....
...In investments, profit is not pegged upon the occurrence of an uncertain event, rather, there are multiple factors resulting in a profit yield, primarily, the performance of the underlying asset relative to various economic, political, social and managerial factors.
4) Gambling involves the transfer of ownership of one’s wealth conditionally on the occurrence of an uncertain event. This is prohibited in Shariah. In investments and trading, uncertainty and risk is not in the transfer of ownership, rather, one owns the underlying assets.
5) In gambling, loss occurs as a result of chancing incorrectly. It a win or lose proposition. In investments, loss is as a result of bad performance of the underlying assets. It is not a simple win or lose proposition.
6) Gambling has gharar (gross uncertainty) as the transfer of ownership is suspended on an uncertain event. Investments have ghurm (risk) and dhaman (liability) as a result of the transfer of ownership from the very beginning.
