Schwab CEO Rick Wurster warned of the “conflation between gambling and investing” in his keynote session to registered investment advisors on Wednesday at Schwab IMPACT in Denver.
Wurster’s remarks took aim at the “blending” of sports betting and prediction markets within financial services. Brokerages such as Robinhood and Interactive Brokers offer prediction markets for users to place wagers on the outcome of events like sports and politics. Americans legally bet $150 billion on sports last year as roughly 40 states now offer legal sports betting.
“Only 5% of the people that go on gambling apps pull out more money than they put into the gambling app, it is the opposite of the benefits of being a long-term investor. I hope as an industry, we're able to tell the story to clients about the difference between gambling and investing,” Wurster said. “I just don't want young people in our country that think that betting on the Monday Night Football game is equivalent to being invested for the long term in stocks and bonds.”
In June, a Schwab spokesperson told InvestmentNews that the company was “monitoring the space and regulatory landscape closely,” in regards to prediction markets, which have soared in popularity since they were quick to predict the likelihood of Donald Trump’s win over Kamala Harris in the 2024 presidential election.
Schwab founder and co-chairman Charles R. Schwab invested in leading prediction market Kalshi in 2021, a relationship Kalshi CEO Tarek Mansour has proudly promoted. Charles’s granddaughter, Samantha Schwab, worked as a business development executive at Kalshi before President Donald Trump appointed her in January to be deputy chief of staff for the US Department of the Treasury.
“In financial services, there's a blending of investing in gambling, and I think it started out with the best of intentions with something called prediction markets,” Wurster said on stage.
“Financial services firms thought prediction markets will allow our clients to take a point of view on what's going to happen with the employment report, what's going to happen with the inflation report or what the Fed is going to do. They built these capabilities to do all of that, and then they realized there's not a lot of interest in these events with the general public.”
Wurster continued by pointing out that while the U.S. presidential election happens once every four years, “there are things that happen every Saturday and Sunday that a lot of Americans care about, and that's football,” he said. Schwab’s website and social media accounts have recently shared content highlighting differences between investing and sports betting or gambling.
On stage, Wurster also mentioned that roughly half of young men engage in online sports betting, and studies link gambling with an uptick in bankruptcies and other financial loss.
“You've seen an incredible rise on these financial services apps of people gambling on sports,” added Wurster. “In fact, if you log into some of the well known financial services apps on a Monday to check your balances, you are likely to get a pop up alert asking you if you want to bet on Monday Night Football. The challenge I see with this is that investing over the long run pays off.”
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