Schwab CEO Rick Wurster recently warned that gambling and prediction markets are dangerously blurring the line with investing. He emphasized that betting on sports or political events is not the same as long-term investing in stocks and bonds, and cautioned that only about 5% of people on gambling apps ever withdraw more money than they put in.
Key Points from Wurster’s Remarks
Conflation of gambling and investing: Wurster said financial services apps are increasingly “blending” sports betting and prediction markets with investing. He worries that young people may start to believe betting on football games is equivalent to investing for retirement.
Prediction markets’ origins: He noted that prediction markets began with good intentions—allowing investors to take positions on outcomes like inflation reports or Federal Reserve decisions. But public interest in those financial events was limited, while sports and elections drew massive attention.
Scale of gambling in the U.S.: Americans legally wagered $150 billion on sports last year, with about half of young men using gambling apps. Studies show legalized gambling correlates with higher bankruptcies and defaults.
Investment vs. gambling outcomes: Wurster highlighted that long-term investing pays off, while gambling apps overwhelmingly result in losses. He urged advisors to help clients understand the difference.
Cultural shift: He pointed out that while presidential elections happen every four years, sports happen every weekend—and that’s where prediction markets have exploded. This shift risks normalizing gambling as a financial activity
I think the content is right on. I see it with my own kids. The desire to get rich quickly is influencing financial decisions. Even with all of the education I have provided them, they still come up with some ideas where I go….what are you thinking ?!?!?
We are way way way into a super mega bull market that began in 1982, with serious intermissions after 2000 and 2007. Young people and old alike are getting way risk at a time when the next decade for stocks is pretty muted. Low single digits per year on average. But “on average” doesn’t mean they will clock 2-3% per year like clockwork. It’ll be +20%, -15%, -10%, +12%, and on and on and after an entire decade it’ll be… why did we do this? As Liz Ann Sonders of Schwab said though, value is a terrible market timing indicator. It’s not a weather forecast, it tells you what season it is… in January in Chicago, don’t expect 90F, In July, don’t expect ice.
We could end this year with 3 consecutive 20%+ annual gains. That is a pretty impressive run in the market, but not sustainable. History would certainly suggest the next year or couple of years to produce more normal returns.
