Charles Schwab, Citadel Circle Prediction Markets While Bernstein Calls $1 Trillion Boom — Even As Regulators Close In: Report

• Charles Schwab and Citadel Securities are reportedly planning to enter prediction markets. 
• Schwab CEO Rick Wurster said the company could easily launch an offering even though there isn't much client demand right now.

Charles Schwab (SCHW) and Citadel Securities are reportedly exploring a potential entry into prediction markets, a $1 trillion market.

Rick Wurster, the CEO of Schwab, said on an investor call that the company is likely to add a prediction market offering at some point, according to a report. 

Wurster said it would be easy to add to its current platform. He also added that the company plans to closely look at the opportunity, even though there doesn't seem to be much client demand right now. 

Wurster said that Schwab would stay away from areas like sports, politics, and entertainment, stressing that any offering would have to fit with the company's long-term investment goals. He also said that retail bettors have had bad results in the past, which is another reason to be careful.

Charles Schwab's price closed 0.3% down on Friday. On Stocktwits, retail sentiment around SCHW remained in an ‘extremely bullish’ zone, while chatter remained at 'high' levels over the past day. 

Citadel Securities Sees Potential In Event-Based Contracts

According to President Jim Esposito, Citadel Securities is also keeping an eye on changes in the space. He said liquidity remains low but could improve over time, according to the report. Esposito said that Citadel is also not looking into sports-related markets, but it does see potential in event-based contracts linked to major political or economic events. 

He said that these kinds of instruments could be used as hedging tools by both institutional and retail investors, especially when big events could affect how well their portfolios do. But neither company has set a date for the launch.

In March, platforms like Kalshi and Polymarket had tens of billions of dollars in trading volume each month. Last month, Ark Invest partnered with Kalshi to provide analytical insight to traders. Cathie Wood, CEO and CIO of Ark Invest, called it "the beginnings of bringing active equity management back into style." Kalshi's event contracts and prediction markets focus on events that have a direct effect on the equity market, said Wood. 

She believes that as more people watch and trade around these events, they may become interested in investing in related stocks. This could lead to some money moving out of passive index portfolios and into more active strategies.

Bernstein (AB) predicted that the volume of event contracts could reach about $240 billion by the end of 2026 and grow into a $1 trillion market by 2030. But in the US, the industry is facing increasing regulatory pressure. 

Some state officials have taken platforms to court over claims of illegal sports betting, and some members of Congress have expressed worry about the possibility of insider trading and the integrity of the market.

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