Charles Schwab, Citadel Both Mull Prediction Market Play

Traditional finance giants Charles Schwab and Citadel Securities are both considering entering prediction markets, with each separately weighing up how they wish to get involved in the fast-growing sector.

“I think at some point we likely will have prediction markets,” Rick Wurster, the CEO of the banking and investing titan Schwab, told investors during a call on Thursday.

He added that prediction markets weren’t “of tremendous interest” when he recently asked a group of Schwab clients about them, but it was an area the company would “take a hard look at, and it would be quite straightforward for us to offer.”

Prediction markets such as the popular Kalshi and Polymarket have exploded in use over the past few months, with both platforms seeing a record combined total monthly trading volume of $23.6 billion in March, according to Token Terminal.

However, Kalshi, Polymarket and other prediction market platforms have also caught the ire of some US state regulators, who have accused them in court of offering unlicensed sports betting.

Some federal lawmakers have also vowed to crack down on prediction markets, claiming the platforms weren’t doing enough to stamp out insider trading.

Wurster said Schwab’s potential offering would steer away from allowing bets on areas such as sports, politics and pop culture as it looks to position itself as a partner for building long-term wealth.

“Prediction markets that are not aligned to that are not something that we want to pursue,” he said. “If you look at the stats on the success of gamblers, they’re not strong, and people generally lose money.”

Citadel “keeping an eye” on prediction markets

Meanwhile, Citadel Securities president Jim Esposito said at a Semafor conference in Washington, DC, on Thursday that the company is “absolutely keeping an eye on developments” in prediction markets. 

“We’re not there yet, there’s not that much liquidity,” he added, but said that the market is likely to “ramp and scale,” and it was “certainly possible” that the market-making firm would potentially look to get involved.

Related: Democrats question CFTC chair on insider trading in prediction markets

Esposito said Citadel was “not looking at sports at the moment at all, I don’t see us entering that market,” but did signal an interest in some event contracts.

He added that Citadel could see its retail and institutional clients use some event contracts as a hedge for risks to their investments, such as contracts for elections, which have been known to move markets.

“That’s going to be some of the biggest risks to investors’ portfolios that they’re going to have to grapple with,” Esposito said. “Having a clean and distinct way to hedge certain risks, I think there’s a good use case and industrial logic to it.”

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