Prediction Markets Hurt FinTech Consumers: Inversion CEO

Financial platforms are turning to increasing prediction markets because of the accelerated “casino-like” value of user congestion, said Santiago Roel Santos, founder and CEO of Inversion Capital.

Santos said in a blog post on Saturday that while he is a “believer in the underlying idea” of prediction markets, offering them in major financial apps like Robinhood would increase the risk of user account verification and risk capturing future value.

“The problem with casino-like products is not that users lose money. This will speed up the casinos,” he said.

“The longer you stay in the casino, the higher the chance of checking out. And liquidation means you're out of the game. A corrupt user has zero value.”

Robinhood is increasing its focus on prediction markets in 2025, and crypto companies Coinbase and Gemini are also soon to offer similar products that allow users to bet on events such as sports and politics.

Santos said that such offerings will ultimately focus on an environment that impacts the core use case of the app. Easy to use financial services for retail customers.

“Products like Robinhood succeed initially because they are simpler, more accessible and more digitally native than Power,” he said.

“However, users will age. Over time, the real opportunity is to grow with them and capture more of their financial life, not to increase a large amount of product when high expectations are created,” he added. “If it is necessary to stay, they will facilitate to stay in power.”

Blockchain-Based Prediction Markets Accepted in the midst of US elections in 2024, Robinhood first jumped in March in partnership with Kalshi.

Related: DraftKings sees crypto offerings as it expands into prediction markets.

Crypto exchange Coinbase announced Wednesday that it is adding prediction markets as part of its “everything app” push in partnership with Kalshi.

Santos ultimately thinks that while prediction markets look good on the balance sheet in the short term, they tend to be too weak for financial applications because they introduce a large amount of risk that can turn users off later.

“Financial super-ups that treat leverage as primary risk end up with stronger breadcrumbs and better long-term results,” he argued.

“If I were in the chair, I would prioritize the products that consumers naturally want as they mature financially: credit cards, insurance, savings vehicles. These are boring. That's why the data shows they work so well. They're tied to the core of managing household liquidity.”

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