Schwab, Citadel Weigh Entry Into Prediction Markets

Charles Schwab and Citadel Securities are exploring entry into prediction markets, with Schwab excluding sports, politics and pop culture and Citadel focusing on event contracts that could be used as hedges. Both firms flagged interest on Thursday as trading volumes rise and regulators increase oversight.

Rick Wurster, Schwab’s chief executive, told investors on a Thursday call that the firm is likely to offer prediction markets at some point and that it would be “quite straightforward for us to offer.” He noted clients had not shown strong interest when he recently asked them and added the company would “take a hard look at” the space. Wurster said Schwab would avoid markets tied to sports, politics and pop culture, saying prediction markets not aligned with building long-term wealth are not something the company wants to pursue.

Wurster also warned that “If you look at the stats on the success of gamblers, they’re not strong, and people generally lose money.”

Jim Esposito, president of Citadel Securities, told attendees at a conference in Washington, D.C., that the firm is “absolutely keeping an eye on developments” in prediction markets. He noted liquidity is limited — “We’re not there yet, there’s not that much liquidity” — and expects the market to expand. Esposito ruled out sports contracts for now and pointed to event contracts, such as elections, that could provide direct hedges for risks affecting investor portfolios. He added, “Having a clean and distinct way to hedge certain risks, I think there’s a good use case and industrial logic to it.”

Prediction market platforms reported a combined record monthly trading volume of $23.6 billion in March. State regulators have sued some platforms, alleging unlicensed sports betting, and some federal lawmakers have raised concerns about insider trading and called for stricter oversight.

Schwab recently added Bitcoin and Ether trading and has been expanding its product set while stressing that any prediction market offering would need to fit clients’ long-term investing goals.

Legal and compliance hurdles remain. State-level claims and federal scrutiny create uncertainty for traditional financial firms considering entry. Both Schwab and Citadel emphasized caution about the types of contracts they would offer.

Market participants include retail and professional traders. Industry observers say further growth will depend on liquidity, transparent rules and clear regulatory frameworks. For now, Schwab plans to avoid betting-style products and Citadel is monitoring event-based contracts for potential hedging use if market depth improves.