Traditional financial giants Charles Schwab and Citadel Securities are considering entering the forecast markets, and each is separately considering how it wants to engage with the rapidly growing sector.
“I think at some point we will probably have prediction markets,” Rick Wurster, CEO of banking and investment giant Schwab, told investors on a Thursday earnings call.
He added that prediction markets weren’t of “particular interest” when he recently asked a group of Schwab customers about them, but it was an area the company would “look at closely and it would be quite easy for us to offer it.”
Prediction marketplaces such as the popular Kalshi and Polymarket have gained enormous popularity over the past few months, and in March, both platforms recorded a record combined monthly trading volume of $23.6 billion. According to to the Token Terminal.
But Kalshi, Polymarket and other prediction market platforms have also drawn the ire of some U.S. regulators, who have accused them in court of offering unlicensed sports betting.
Some federal lawmakers have also vowed to crack down on prediction markets, saying the platforms weren’t doing enough to crack down on insider trading.
Wurster said Schwab’s potential offer would move away from allowing bets on areas such as sports, politics and pop culture as it wants to position itself as a partner in building long-term wealth.
“Forecast markets that are not geared to this are not something we want to pursue,” he said. “If you look at the statistics on gamblers’ success, they are not strong and people usually lose money.”
Citadel is “looking” at prediction markets
Meanwhile, Citadel Securities CEO Jim Esposito he said on Thursday at the Semafor conference in Washington, D.C., that the company is “absolutely following developments” in forecasting markets.
“We’re not there yet, there’s not a lot of liquidity,” he added, but said the market would likely “take off and scale” and it was “certainly possible” a market-making firm would potentially want to get involved.
Related: Democrats question CFTC chairman over insider trading in prediction markets
Esposito said Citadel “is not interested in sports at all right now, I don’t see us entering that market,” but signaled interest in some event-related contracts.
He added that Citadel may see its retail and institutional clients apply some event-related contracts as a hedge against risks associated with their investments, such as election contracts that are known to move markets.
“This will be one of the biggest threats to investors’ portfolios that they will face,” Esposito said. “I think there is good industrial rationale and logic in having a clear and explicit way to hedge certain risks.”
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