Prediction Markets, Sports Betting Blurring Lines with Investing, Says Schwab
Posted on: April 8, 2026, 03:01h.
Last updated on: April 8, 2026, 03:01h.
- Brokerage firm echoes refrain voiced by other betting, prediction market critics
- Schwab says those that are most drawn to sports betting are those that can least afforded the related losses
- Asset manager says bettors are missing out by not investing
Charles Schwab (NYSE: SCHW), one of the largest brokerage houses, is warning that online sports betting and prediction markets increasingly blur the line between wagering and investing with potentially ruinous consequences for those that can’t see the difference.
The asset manager joins an increasingly lengthy list of critics and market observers noting that the proliferation of legalized sports wagering and, more recently, yes/no exchanges, is seducing some unwitting bettors and traders into thinking gambling and investing are the same activity. Chief Investment Strategist Liz Ann Sonders and Kevin Gordon, head of macro research and strategy at the Schwab Center for Financial Research, note that betting and investing are two distinct concepts that shouldn’t be conflated for a simple reason: bettors hope while investors own.
This distinction has never been more important to articulate clearly. The youngest generation of investors is being inundated with the message that investing and gambling are essentially the same thing,” observe the Schwab duo. “The platforms and personalities delivering that message have worked hard to make the experience look and feel like a casino, emphasizing entertainment, instant gratification, and the thrill of placing a bet on nearly anything.”
Charles Schwab, the founder of the company, is an investor in Kalshi, but the financial services firm itself is taking a hands-off approach to prediction markets. Additionally, CEO Rick Wurster has publicly voiced concern that too many young market participants aren’t seeing the differences between betting and investing.
‘Crisis In the Making’
In their report, Gordon and Sonders note prediction market messaging is “seductive” and it’s often served up to prospective traders without adequately informing about potential risks.
There’s no getting around those risks. New research suggests 84.1% of Polymarket traders lose money and only a scant percentage are consistently profitable to the point that trading on the platform represents supplemental income, let alone a full-time job. Compounding those woes are other data points confirming retail prediction market traders often lose more capital and lose it faster than their sports betting counterparts.
Making matters worse is the point highlighted by Gordon and Sonders that bettors and prediction markets aren’t dialing back on other forms of entertainment to feed their wagering habits. Rather, they’re directing cash to sportsbooks and yes/no exchanges that should be flowing to brokerage and retirement accounts.
“For every dollar directed toward sports betting, net investment in equities and other financial instruments fell by just over two dollars,” say the Schwab strategists. “The money flowing into these gambling sites was not discretionary leisure spending. It was likely wealth that would otherwise have been building toward long-term financial security.”
A Heavy Burden
A variety of studies confirm sports betting can have troubling financial consequences, including higher rates of personal bankruptcy and lower credit scores. Others note vulnerabilities among specific demographics, namely young men.
Gordon and Sonders didn’t get into the potential ill effects of betting and prediction markets on specific groups, but they point out those that bear the heaviest burden are usually those that can least afford it.
“The households most likely to be drawn to the promise of a lottery-like windfall through online betting are, almost by construction, the ones with the least financial cushion to absorb the near-certain losses that follow,” they conclude. “The platforms are frictionless by design—a bet can be placed in seconds, from a phone, at two in the morning—however, the financial consequences are anything but.”
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