Rick Wurster: Schwab Open to Prediction Markets But Leaving Sports Betting to Sportsbooks (Like Robinhood)
Drawing a clear distinction between gambling and investing, Schwab CEO Rick Wurster acknowledged the company is prepared to explore offering prediction markets to its clients.
If and when it gets into prediction markets, though, Schwab will do it the right way, Wurster implied. That means giving customers the opportunity to use yes/no event contracts as legitimate hedging tools, not sports bets.
“I distinguish between prediction markets and gambling,” Wurster said Thursday on Bloomberg Businessweek Daily.
To me, prediction markets and the way they started were about being able to forecast [outcomes] like employment or inflation and being able to take a point of view or position on those, and that can somehow hedge or accentuate the positions in your investment portfolio. As those were born, I think that makes sense within the context of an investment portfolio, and we’re absolutely open to having that on our platform.”
His remarks are not anything of departure from what he told an audience of investment advisors in November.
“I hope as an industry, we’re able to tell the story to clients about the difference between gambling and investing,” Wurster said during his keynote at the Schwab IMPACT conference in Denver. “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.”
Sports Betting is Not Investing
A major grievance against prediction markets is they position themselves as a means to build wealth. With sports event contracts accounting for the bulk of trading, that’s an impossible argument for either the gambling or investment industries to buy.
Wurster estimates that 95% of the volume on prediction markets is “actually just sports gambling.”
That’s not something that we’re keenly interested in getting into for a very simple reason. … Our mission as a firm is to make clients better off in their financial life, and less than 5% of people who go on to one of these gambling apps take out more money than they put in the first place. That’s the complete antithesis of what we do at Schwab.”
While Bloomberg host Tim Stenovec noted Robinhood wants to position itself as a competitor to companies like Schwab, Wurster bucketed the financial trading app with the nation’s foremost sportsbooks.
“We’ll leave the sports gambling … to the gambling houses — to the FanDuels, the DraftKings and the Robinhoods,” he quipped.
Prediction Markets ‘Not High on our Innovation List’
According to Wurster, sports are dominating trading on prediction markets because the financial hedging the platforms are intended for can be accomplished in a multitude of other ways.
If you want to take a position on the employment report or the inflation report, there are countless ways to do that, and financial market participants are already doing that, whether it’s in the bond market, in the futures market, through options. …
“I think that’s part of the reason why the true idea of prediction markets really haven’t taken off and why the firms that offer this have pivoted to sports gambling, because there’s a lot more interest in that than there is in taking a position on the employment or inflation report.”
So prediction markets probably aren’t coming to Schwab any time soon.
“[Other innovations] are far more impactful to our clients’ ability to grow their wealth than prediction markets,” Wurster said. “When we go out and survey our clients about what they want from us, prediction markets is low on the list. …
“So it’s something we are actively looking at. I think at some point in the future we will have true prediction markets … but it’s just not high on our innovation list.”
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