It's just debt arbitrage. The problem is that they were not sufficiently sophisticated (i.e., they were ignorant about how the game was rigged, the house was b

It's just debt arbitrage. The problem is that they were not sufficiently sophisticated (i.e., they were ignorant about how the game was rigged, the house was built on an old cemetery, or that they were walking through the part of town with the highest violent crime rate) to profit in an extremely hazardous environment. I won't get into the "providing liquidity" or "it's just moving money around" arguments (feel free, though), but it's not significantly different from taking out a loan or accepting funding for a start-up. In most cases, you are accepting more financial risk than you can afford to pay in the belief that you can leverage that capital to generate a profit above the principal and interest. While in come cases it can be very much like gambling, that also covers "games" where skill can influence the outcome. For example, slot machines in a Russian casino are probably not the best risk. However, if you're a good poker player, you can do quite well in private games.