Prediction markets are booming. Platforms like Kalshi and Polymarket have already seen about $60 billion in trading volume so far this year, surpassing the $51 billion recorded in all of 2025, according to a recent Bernstein report. At current growth rates, the investment bank projects total prediction market volume could hit $240 billion in 2026 and reach $1 trillion a year by 2030.
For a growing number of retail users, that means the ability to trade on everything from election outcomes and macroeconomic data to sports and crypto events. For advisors, it raises a more basic question: is this investing, or just a new wrapper on gambling behavior that can quietly undermine clients’ plans?
Brian Jacobs, a portfolio manager and advisor at Aptus Capital, leans firmly toward the latter view.
“It used to be that you’d have to drive to a casino to lose money. Now you can do it in your bedroom, on your phone, the moment you wake up," Jacobs told InvestmentNews.“To me, it’s more akin to betting and gambling than investing."
Aptus, an RIA with $14.2 billion in assets under management, works primarily with advisors serving higher-net-worth and more discriminating clients. In that segment, Jacobs said prediction markets have not become a real part of planning conversations.
“Honestly, none of our clients have really brought them up,” he said. In his view, “[prediction markets are] not applicable to having an investment plan.”
During Schwab's Q1 earnings call last week, CEO Richard Wurster told analysts the firm sees a clear distinction between event contracts tied to financial markets and those pegged to “sports, politics, pop culture.”
“Our goal as a company is to help our clients live their best financial lives,” Wurster said. “And so prediction markets that are not aligned to that, are not something that we want to pursue.”
He pointed to the long odds most gamblers face and said Schwab has “kept sports and other things off to the side,” adding that client interest in prediction markets so far has been low. At the same time, he acknowledged that binary options and other contracts tied to financial events are emerging and could be “quite straightforward” for the firm to offer if it chooses.
That tension between trading structures that look like derivatives and behaviors that look like gambling is where Jacobs sees the real risk for investors.
“From a regulatory standpoint, I think it’s defensible,” he said of the CFTC's view that event contracts can function as hedging tools. “But there are functional differences that we think regulators are probably glossing over.”
Jacobs contrasted long puts in a portfolio with binary event contracts. A put option, he argued, is “a structural tool” that can change a portfolio’s behavior, protect against drawdowns and even support a higher equity allocation. “Whereas a contract on a standalone binary bet doesn’t really serve a portfolio in the same way,” he said.
Even when prediction markets touch on macro themes advisors follow – such as Federal Reserve decisions or inflation data – Jacobs sees them reinforcing time horizons that run counter to long-term investing.
“To me, it’s very similar to the Reddit WallStreetBets, meme stock phenomenon,” he said, explaining how huge wins can push people to “make large, outsized bets to win in the market” over very short windows, instead of making “small, probabilistic bets that compound over 20 to 30 years.”
If traders happen to guess right on a near-term event, he warned, “that can sometimes make things worse – because you might become overconfident, make bigger bets, and lose money over time.”
The fee and capital structure of many prediction markets also looks different from traditional hedging tools. “It’s zero-sum, less a very high fee,” Jacobs said. Even one of the cheapest platforms, he noted, “takes around three and a half percent.” And unlike many investment derivatives, event contracts often require tying up significant capital until resolution, limiting investors’ flexibility.
“These platforms are net-zero in the sense that there’s always a winner for every loser,” he said. “But the real winner over time isn’t likely to be individuals – it’s going to be the platforms themselves, taking the vig out of every transaction.”
At the platform level, that vig is part of what is fueling bullish projections. Bernstein analyst Gautam Chhugani estimates prediction market volumes are growing at roughly an 80% compound annual rate between 2025 and 2030, at which point the firm reckons the market will be worth $1 trillion.
Major fintech and betting brands are also paying attention. Robinhood, DraftKings, and Underdog have all either launched or are building prediction market offerings. For advisors, that convergence of brokerage, trading and event betting could make it harder to draw clean lines for clients.
“You see it already – Robinhood is shifting out of pure investing into prediction markets, and prediction market platforms are beginning to move into the investment side,” Jacobs said. “There’s going to be this blur.”
For now, he said the most effective advisor response has been to treat prediction markets the way many advisors treat speculative single-stock trades or crypto bets: as entertainment, not strategy.
“What we’ve seen with the most successful advisors is an approach of carving out a small portion of the portfolio – if a client wants to engage in more tactical bets, let them get their fix that way,” Jacobs said. “When you frame it as entertainment, the scale should be smaller. ... It really comes down to sizing it accordingly.”
That framing could matter more if Bernstein’s trillion-dollar outlook proves accurate. “A trillion dollars chasing binary contracts – the worst-case scenario is simply that it’s a trillion dollars not compounding in investment markets,” Jacobs said. “For those viewing prediction markets as anything other than entertainment, that’s the real risk.”
Beyond that, he argues the core concern for advisors is not prediction markets as a product, but the behaviors they may normalize.
“The biggest danger I see is that a lot of these products – whether it’s prediction markets, Robinhood single-stock trading, or leveraged ETFs – are pitched as investment-enhancing solutions,” Jacobs said, pointing to "misplaced marketing" that could target younger or less experienced investors. “Nobody would pitch blackjack as an investment-enhancing solution.”
(Author's note: Updated fifth paragraph to correct AUM figure for Aptus Capital.)
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