Well they work like any other liquidity swap.

You lend money to the guys who want to use margin trading (leveraged accounts) and i think you win in both cases even if they win or lose.

Until they use leverages i think the funds are safe, but the interest on it will depend i think on how much loan they take. Of course the price will vary, so there will be volatility, but not much.

They are usually a safer instrument but it all depends how the exchange handles things around, there might be many hidden risks with it, so make sure you read their risk statements.