I’ll just say that there is a huge difference between insurance and betting / gambling. Also, activity that surrounded short-selling in financial industry is like hurting the horse before the race and then betting against it. Remember the fraud around the original “viaticals insurance” industry? BTW, it’s being repackaged now into “life settlements”, and Warren Buffett is one of the principals of “mainstreaming” it.
Not to mention the sheer size and consequences of the “bets” outside of horse racing industry vs financial industry / system which by necessity and by definition must be leveraged to make any profit. Leverage kills on the way down, simply by feeding on itself like avalanche and in the process liquidating standbys in other markets that are not leveraged or had nothing to do with original issues.
It’s like saying that pimple is a signal that something is wrong, then infecting it with small pox virus.
While there is a value in short-selling strategy (like “collars” etc.), it should not become the instrument of deliberate value destruction.
For practical purposes, it is almost impossible to differentiate “gambling” from “investing.” The characteristics of each are so much in common that they are for all intents and purposes the same.
While you might view credit default swaps as “gambling”, somebody who has a position in mortgage securities would view it as a “hedge.” Unless you can figure out a way to divine investor’s intentions in advance, you will never be able to differentiate between the two.