Speculation Nation: Who Ya Gonna Call — Your Broker Or Your Bookie?

Once upon a time, the world of investing existed separately from the world of gambling. That was then. This is now.

Investing v. Speculating

The wall began to crumble with the passage of the JOBS Act, which loosened investor protections enacted in the 1930s.

The erosion continued with the rise of meme stocks.

Don’t get us started on cryptocurrency. We’ve laid our thoughts out clearly here.

More recently, a fresh round of mortars was fired into the wall by the SEC’s decision to let investors self-certify that they meet the ‘accredited investor’ requirements — just another reason why we’ve urged you to tread carefully amid the flood of new investment opportunities coming your way.

Then there’s the expanding world of speculating (which is not the same as investing, even if so many people can’t tell the difference). In May, ‘zero days to expiry’ contracts comprised more than 60% of volume in the S&P500. Recent weeks have also seen ETF issuers ramping up the race to launch ever-riskier leveraged ETFs.

Suffice it to say, the line between investing and speculating can be about as porous as a SPAC’s business plan. All we can do is remind people that the two activities really are quite different.

Investing v. Gambling

But at least we don’t have to worry about people confusing investing with outright gambling, right? People who go to a casino, play the lottery or the slots, or bet on the horses, understand they are gambling, right? Not so fast…

What happens when the storied New York Stock Exchange gets into the gambling business? No, wait, it didn’t do that. But it did get into the ‘prediction market’ business. A rose by any other name…

Earlier this month, Intercontinental Exchange (the parent company of the New York Stock Exchange) announced it was investing up to $2 billion in Polymarket, a crypto-based prediction market platform.

What’s Polymarket?

Polymarket is an online platform where users can bet on anything (and we really do mean everything) — from election results to the date of Taylor Swift’s next album release.

For the past 3 years, it was legally restricted for US users. Now, thanks to a no-action letter and the recent acquisition of QCX, a Commodity Futures Trading Commission (CFTC)-licensed and regulated derivatives exchange and clearinghouse, the platform is poised to make a comeback in the US.

Prediction markets are booming right now, and Wall Street is eager to jump on the bandwagon.

Back in August, sports betting site FanDuel announced that it was teaming up with derivatives exchange CME Group to offer bets on stocks, commodity prices, and inflation later this year. Meanwhile, tools like Robinhood and Interactive Brokers are also now letting investors place bets on sports and politics.

What this all shows is that we are beginning to see the “cross-fertilization” of two very different worlds.

So, what does it mean if the line between investing and speculating starts to blur?

Traditional markets like the NYSE are built to trade securities closely tied to real-world value. After all, it consists of publicly listed companies that sell products or services, hire workers, and generate profits. Traders may speculate, but the underlying assets have intrinsic worth that’s grounded in economic activity.

Prediction markets like Polymarket, on the other hand, are built to trade in information rather than ownership. Instead of buying shares in a company, participants buy and sell shares in possible outcomes — who will win an election, whether inflation will rise, or if new tech will launch on time. The prices of these shares shift as collective expectations change, turning public sentiment into a tradable forecast.

In other words, they’re markets for belief, where value comes not from assets or earnings, but from the aggregated wisdom, and biases, of the crowd. This ‘wisdom’ isn’t always well-backed research. Often, it’s sourced from a viral tweet or even just pure vibes.

So, is it gambling? Yes.

Then why is it legal?

State gambling laws will tell you that it’s not legal. But the problem is that there are plenty of exceptions to and exemptions from state laws against gambling. And some prediction market platforms, like Polymarket’s competitor Kalshi, are already federally regulated as financial exchanges by agencies like the CFTC. This means that the aforementioned state gambling laws simply don’t apply to Kalshi (nor will they soon apply to Polymarket), though some states are challenging this.

It’s risky business (and not the Tom Cruise kind).

Too many investors are gliding into the markets, only to find that the floor is far slipperier than it looks.

It may be part of our psychology to desire immediate payout, but investing, at its core, is supposed to be a long game. It’s about putting money into enterprises that grow, innovate, and return value over time. When investors treat their portfolios like betting slips, they’re not investing in the future but gambling on the present.

You wouldn’t spend your retirement savings at the casino, so don’t treat prediction markets any differently.

©2025. DailyDAC^TM, LLC d/b/a/ Financial Poise^TM. This article is subject to the disclaimers found here.

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