You're right, in that situation you're not borrowing from others, you're borrowing from your own capital.

That said, it is a little different, because without margin you can ride out any position, but with margin you get margin called (liq'd) at increasingly smaller deviations.

Or in another view of it, it does the equivalent of turning low-return 1:1 odds into high return 100:1 odds which further attract problem gamblers.

Watch the rekt bot for a while and tell me that there aren't a lot of problem gamblers on mex.