Prediction Markets Raise Gambling Addiction Concerns

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You're listening to Bloomberg Businessweek with Carol Massar and Tim Stenovec on Bloomberg Radio.

**Tim Stenovec** (0:16)
I've been eager to get to this story by Ira Boudway, he's global business reporter for Bloomberg News. This is one of those stories in Bloomberg Businessweek that you start reading, and you just can't put down because it's engaging, and it's about something that I think everybody is thinking about right now. And that's about prediction markets and the connection to gambling, specifically when it comes to sports.
Ira Boudway joins us here in the Bloomberg Interactive Brokers Studio. Your story focuses on a man named Chad, does not go into his last name, but tell us a little bit about him and what happened to him once he discovered this prediction markets platform.

**Ira Boudway** (0:52)
Yeah, he's a college student, enrolled a few years ago in Texas and fell into a gambling addiction there, not through prediction markets, initially through dorm room bookies, daily fantasy sites, all the kind of social gaming, every all the different ways because gambling is not legal, sports betting is not legal in Texas, but he found ways. And by his junior year, it had gotten so bad he bottomed out, he basically lied to his parents, burned through about $100,000, fessed up, went home to Utah, and was sort of cleaning up, getting away from gambling and discovers Kalshi. And in his mind, so it's legal in Utah, sports betting is not.
And he thinks, oh, this is a way to win back the money that I owe my parents to get everything back and quickly starts betting there. And over a six-month or so period, lost about $12,000 and then his father discovered bank statements where he was depositing money to Kalshi, including money that he borrowed in personal loans.
And they intervened. He eventually went to rehab into a treatment facility. But it was interesting to me because this was a case of sort of expanding access for people who are vulnerable. And he, this was something that, you know, his parents, certainly his mother had never heard of it, didn't know what it was, didn't know to look out for it. And other people I spoke with said, yeah, this is a problem. We're seeing clinicians and support groups saying, yeah, there's young people, especially men falling vulnerable to prediction market betting and not necessarily knowing that they should think of this as you might think of DraftKings or any other sports book as an addiction risk.

**Carol Massar** (2:40)
So in your story, we also got the perspective from Kalshi, right? And very importantly, they say that Chad's story, it's a cherry pick case, and they maintain that they do have a list of users who have self-excluded, and they have just in general really made a distinction that prediction markets are not gambling. But for consumers like Chad, is there really much of a difference effectively?

**Ira Boudway** (3:03)
Yeah, I mean, it's interesting. I think when you just talk about the basics of it, a few clicks, you're getting to put money down on an outcome. You might win, you might lose. That is the essential experience and that is the same addiction, kind of dopamine rush, the same chasing losses, all the same problems that you see with sports betting. Clinicians told me they come up in the context of prediction markets. There's no real important difference there. Kalshi says, look, you're not betting against the house. We don't lose when you win.
So we don't have the same incentives to prey on you as a prediction market does. And they also say, hey, we use a lot of the same tools to protect our users, exclusion lists and so on.
So it's interesting because on the one hand, they're saying we're not a sports book. On the other hand, we're saying we do all these things that sports books do to try to protect our customers.

**Tim Stenovec** (3:54)
What do you think of that? Well, I should note, Kalshi says, quote, this is a cherry picked case. As you mentioned, the company says that we've prioritized making Kalshi the safest venue for people to trade on. This is according to a Kalshi spokesperson.
Ira, I'm glad you brought up this idea of what the prediction markets say when you say, isn't this just sports gambling? Tark Mansour has told me the same thing. Brian Quintenz, who we had on yesterday, former CFTC commissioner who's now on Kalshi X's board, Kalshi Exchanges board, says the same thing. It's not gambling because the house is not involved. You're not betting against the house. You wrote this story about Chad.