Of course the concept of a "free market" is entirely theoretical. This truism was reflected in my comment on market efficiency inherently presuming that the market was not 100% efficient, but maybe you missed that.
Although I would love to explore the absurdity of your suggestion that a Chinese "peasant" could be involved in their equity market to ANY degree, let's forget about China because this discussion is clearly about the US, as the markets in the two places are, in many dimensions, not comfortably comparable.
Here, nobody is forced or coerced to participate in the market. It is irrelevant and meaningless to discuss whether or not it is "sad" when a participant who cannot afford to incur losses or sub-optimal performance, in fact does so--for instance, it might make you "sad", but it does not make me "sad".
And again with "holding the bag", clearly a euphemism employed for its usual and ordinary connotations and resultant emotional effect. "The bag" is NOT empty, it still contains the same things as it did the day before, and they still pay the same dividends as the day before, and they can still go down further, or rise further. There is no "destruction" of anything real. "Wealth" is not created or destroyed by this mechanism; prices are not a measure of "wealth".
This has nothing to do with greed, as you so wrongly suggest. That suggestion is so unsupported that it isn't worthy of discussion.
Finally yes, small fish like us are all for making the market more transparent and more democratic. So what? Again, if you think it is "too" opaque and "insufficiently" democratic for your liking, don't invest in it.
Where are you going with these emotional appeals? When I "buy" an equity, I buy it to do something with it, and what I do with it is entirely my business, within the envelope of law and regulation. That dominion is the entire basis of the concept of private property ownership.
I buy these equities in order to sell them at a future time. I choose to sell them when I make money doing so, which is an entirely legitimate use of private property. Is "wealth" created? No. Are resources transferred to me? Yes. As a result of anything that I have done? Yes. Do I deserve it? Yes, just as I would deserve any loss I would incur if I decided to sell at a loss.
If you don't understand this, research the concept of economic waste, and see that there is no waste in this.
I find your thinking on this issue undeveloped and rudimentary.