Prediction markets are experiencing a surge in activity, with platforms such as Kalshi and Polymarket recording approximately $60 billion in trading volume during the first part of 2025, according to a recent report from Bernstein. This figure already exceeds the $51 billion transacted in all of 2024. The investment bank projects that total volume could reach $240 billion in 2026 and potentially hit $1 trillion annually by 2030, driven by retail interest in event contracts tied to elections, sports, and macroeconomic data.
For financial advisors, the rapid growth raises a fundamental question: are these instruments a legitimate investment tool or a new form of gambling that could derail client portfolios? Brian Jacobs, a portfolio manager and advisor at Aptus Capital, an RIA overseeing $14.2 billion in assets, leans strongly toward the latter. "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."
Jacobs noted that among Aptus Capital's clientele—primarily high-net-worth and sophisticated investors—prediction markets have not entered planning conversations. "Honestly, none of our clients have really brought them up," he said, adding that such instruments are "not applicable to having an investment plan." This sentiment echoes caution from larger industry players. During Schwab's first-quarter earnings call last week, CEO Richard Wurster drew a clear line between event contracts tied to financial markets and those linked to "sports, politics, pop culture." Wurster stated, "Our goal as a company is to help our clients live their best financial lives. And so prediction markets that are not aligned to that are not something that we want to pursue." He noted that client interest in prediction markets remains low and that Schwab has "kept sports and other things off to the side."
Jacobs highlighted structural differences between binary event contracts and traditional hedging instruments like put options. A put option, he argued, is "a structural tool" that can alter a portfolio's risk profile, 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 such as Federal Reserve decisions or inflation data, Jacobs sees them reinforcing short-term time horizons that conflict with long-term investing. He compared the phenomenon to the Reddit WallStreetBets and meme stock frenzy, where large, outsized bets on near-term events can lead to overconfidence and eventual losses.
The fee structure of prediction markets also differs markedly from traditional investments. Jacobs noted that even the cheapest platforms charge around 3.5% per transaction, and the markets are zero-sum—meaning one participant's gain is another's loss, minus the platform's cut. "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." This fee structure is part of what is fueling bullish projections from analysts like Bernstein's Gautam Chhugani, who estimates an 80% compound annual growth rate for prediction market volumes through 2030.
Major fintech and betting firms are taking notice. Robinhood, DraftKings, and Underdog have all launched or are developing prediction market offerings. For advisors, this 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, Jacobs recommends that advisors treat prediction markets as entertainment rather than strategy, similar to how many handle speculative single-stock trades or crypto bets. "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," he said. "When you frame it as entertainment, the scale should be smaller. It really comes down to sizing it accordingly." This framing could become increasingly important if Bernstein's trillion-dollar outlook proves accurate, as a flood of capital into binary contracts may test the discipline of both advisors and their clients.
