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A Joe Average is legally allowed to walk into a casino and lose all his money, pretty much guaranteed over long term.

A Joe Average is legally allowed to play all kinds of lotteries, pretty much guaranteed loss over long term.

A Joe Average is legally allowed to invest his 401k in the riskiest penny stock one can find.

This has nothing to do with risk, it's 100% gate keeping.

[vinceguidry]

The reason investing is treated with greater scrutiny than gambling is because of the psychological factor. When you gamble, you're under no illusion that you're guaranteed to win. But it's easy to be fooled into thinking there's a way to hedge risk without putting in the time and effort to learn how.

Every single time I see democratized access to riskier financial markets actually make it to the public, I can hold my breath and wait for the news reports to come out about the scams and grifters that come out of the woodwork to take advantage of little old grandmas, who wouldn't ever think of pulling the cash out from under the mattress that she's saving for little Penny's college fund and going to Vegas, but can easily be talked into "investing" it in the brand new wave of "tech" sweeping the nation.

It's not Joe Average these laws protect. It's Joe Average's less cognitively-blessed parents. It's so easy to fool old people that if we don't take positive steps to stop it from happening, it becomes an industry.

You can't get rid of all of it, but you can at least push the wolves out to the periphery.

[trophycase]

Yep, penny stocks, options and margin trading are all available to a retail investor. But hey, I want to invest in a new business? I want to buy Bitcoin? I want to participate in an ICO? Sorry. It's all about gatekeeping and not letting me do what I want with my money.

[verall]

I don't like the gate keeping either but so called "entrepreneurs" would just go around washing people. The point is that you have enough money so no-one cares that the space mining company you invested in only hires website designers. Pumping penny stocks is illegal, but when it wasn't, salespeople were washing people.

[govg]

It could also merely be convenience - as a startup you want to raise a few millions or whatever, and you want it all to come from a few sources, not too many. If you opened this up to an average investor, it will be a headache consolidating all of them. Also, there are offerings by banks for wealthy clients who can invest in the banks' PE or VC arm, this allows access to the clients, and since it's one bank providing liquidity the people obtaining it don't have to manage anything.

[matwood]

> A Joe Average is legally allowed to invest his 401k in the riskiest penny stock one can find.

Most 401ks do not allow individual stocks. Some do, but often with only a small % of total account value.

IRAs typically act more like a general equity account, but by that point I would argue a person is already a bit more financially savvy. If they have taken the time to either open an additional retirement account or roll a 401k over from a prior job, then they have some idea about penny stock risk.