Prediction Markets are ‘95% Sports Gambling’

Charles Schwab CEO Rick Wurster recently sat down with Barron’s for a wide-ranging interview, during which he shared his opinion on prediction markets.

Kalshi, Polymarket, Robinhood, and others continue to expand despite several lawsuits challenging their legitimacy to operate in 10 states across the country.

“I think prediction markets started out with the best of intentions when people started,” Wurster said. “The idea that you could take a position on employment or, ‘What was the Fed going to do?’ and all those kinds of things. That was tied into the portfolio; you could make the case that this is a hedge against my portfolio if something happens in one of these reports. And, so that made sense to me.”

The 2024 Presidential Election then changed the game for prediction markets, bringing them into the American mainstream.

“People began to bet on the election, and the volume skyrocketed,” Wurster said. “And I think these firms that had launched prediction markets thought to themselves, ‘Well, isn’t this great? Look at this volume and this engagement we’re getting around this election. Wouldn’t it be nice if we had that kind of interest all the time?’

“And they thought to themselves, ‘Well, the way to do that, there’s things every Saturday and Sunday that America really cares about, and that is college and professional football.’”

Wurster then made his position on the current state of prediction markets clear to Barron’s interviewer Andy Serwer.

“Now if you look at prediction markets, it’s 95% sports gambling,” Wurster said. “And it’s a way of arbitraging the state gambling rules, and so I think prediction markets have really changed. I think the original intent of prediction markets was a fine one, and now it’s become sports gambling.”

Line Between Trading & Betting Blurred

Kalshi and other platforms recently formed the Coalition for Prediction Markets, which advocates for the legal status of prediction markets. The platforms are currently regulated at the federal level by the Commodity Futures Trading Commission (CFTC).

Opponents argue that they constitute sports betting and should be subject to the same state regulations as commercial sportsbooks.

New CFTC Chair Michael Selig indicated that it’s a matter for the courts to decide while the commission must remain active in preventing fraud, manipulation, and abusive conduct.

Troutman Pepper Locke Attorney Stephen Piepgrass, who leads the firm’s Regulatory Investigations, Strategy + Enforcement practice, told CasinoBeats that it might be a while before the courts issue a final verdict.

“A year and a half, maybe two years for these cases to work their way through the courts, for a circuit split to develop, and then for the Supreme Court to decide to take it,” he said. “So, easily two years — maybe more. We’re going to have a significant period of time where operators, investors, and the public are operating in the gray.”