I would say that it is mainly because instead of having 100 dollars making 1% profit and getting you 1 dollar profit, you could have risked 10 dollars and either lose all of that 10, or earn 10 instead, that way can trade 10 times, instead of 1 time, and potentially have bigger wins, but at the same time you are risking bigger losses as well.
However, the fee structure is of course a lot worse in that case, because instead of one fee, for just one or two trades for the whole thing, you are leveraged out, stretched thin, risked more, and paid more fee. But lately I heard that some exchanges are offering discounts in trading fees if we hold their exchange tokens and this could be a one of the solution for not losing because of excess fees for our trading.
I mean it is true THAT is the reason why they do it, but that doesn't mean that it makes sense. I understand why they do it, and the logic is true that they could spend a lot less to earn a lot more. In fact, instead of using 100 dollars to make 1 dollar profit, and using 10 dollars to leverage out and do 100 dollars, they could use 100 dollars to make 1000 dollar profit. Doing 10x with leverage is not impossible and you could get lucky.
But the problem is that majority of people who do leverages end up losing money, and that is the root of the problem. There are a few who consistently make money, but rest are just losing money overall. You could profit today, but if you look yearly, almost everyone loses money, there are like maybe 10% who are up for the year.