Financial Platforms Risk User Burnout with Rush to Add Prediction Markets, Warns VC Expert
Prediction Markets: A Double-Edged Sword for Financial Apps
In a compelling critique that has resonated throughout the financial technology sector, Santiago Roel Santos, founder and CEO of Inversion Capital, has sounded an alarm about the growing trend of finance platforms incorporating prediction markets into their offerings. While these betting features may boost short-term engagement, Santos warns they could ultimately accelerate user churn in a manner reminiscent of casinos—potentially undermining the long-term sustainability of these platforms.
Santos, who shared his perspective in a detailed blog post published Saturday, isn’t opposed to prediction markets conceptually. Rather, he cautions that integrating these gambling-like features into mainstream finance applications such as Robinhood could seriously threaten future value capture by significantly increasing the risk of user account liquidation. “The problem with casino-like products isn’t that users lose money. It’s that casinos accelerate churn,” Santos explained, highlighting a fundamental issue often overlooked in the pursuit of short-term gains. “The longer you exist inside a casino, the higher the probability of liquidation. And liquidation means you’re out of the game entirely. A churned user is worth zero.”
The Rapid Expansion of Prediction Markets Across Financial Platforms
The landscape of financial services is witnessing a significant transformation as major platforms race to incorporate prediction markets into their offerings. Robinhood has been notably aggressive in expanding its prediction market capabilities throughout 2025, while cryptocurrency giants Coinbase and Gemini are positioning themselves to launch similar products that will allow users to place bets on various events ranging from sports outcomes to political developments.
Robinhood’s journey into prediction markets began in March with a strategic partnership with Kalshi, marking an early entry into what has become an increasingly competitive space. Following suit, Coinbase announced on Wednesday its intention to add prediction markets as part of its ambitious “everything app” strategy, also in collaboration with Kalshi. Meanwhile, Gemini has secured a significant advantage with an affiliate winning a U.S. license to offer event contracts, further legitimizing this rapidly growing sector. The timing of these developments coincides with a notable surge in adoption of blockchain-based prediction markets during the 2024 U.S. elections, indicating substantial market demand for such services.
Short-Term Gains Versus Long-Term Sustainability
At the heart of Santos’s critique lies a fundamental question about the strategic direction of financial platforms. While prediction markets may enhance short-term profitability and user engagement metrics, Santos argues that they fundamentally misalign with the core purpose that made these platforms successful initially. “Products like Robinhood succeed initially because they are simpler, more accessible, and more digitally native than incumbents,” he observed, pointing to the original value proposition that attracted users to these platforms.
Santos contends that financial platforms are overlooking a crucial reality: their user base naturally evolves over time. “But users age. Over time, the real opportunity is to grow with them and capture more of their financial lives, not to maximize extraction at the moment of peak speculation,” he emphasized. This perspective challenges the current trajectory of many financial platforms, suggesting that the pursuit of immediate gains through prediction markets could come at the expense of building enduring relationships with users throughout their financial lifecycle. As Santos aptly noted, “If durability matters, you optimize for staying power,” highlighting a philosophical divide in how financial platforms approach user relationships and long-term growth strategies.
The Casino Effect: Understanding the Risk of Accelerated User Churn
The comparison between prediction markets and casinos forms the cornerstone of Santos’s warning. The gambling industry’s business model inherently accepts—even expects—that users will eventually lose their funds and stop playing. This “casino effect” represents a fundamentally different approach than traditional financial services, which ideally aim to help users grow their assets over time. When financial platforms incorporate prediction market features, they risk importing this same dynamic of accelerated user churn into their ecosystems.
Santos illustrates this concern with a stark visual in his blog post, demonstrating how prediction markets can destabilize users’ financial positions and ultimately lead to their exit from the platform altogether. While prediction markets may appear promising on quarterly balance sheets, Santos argues they introduce a significant amount of risk that could prove devastating in the long run. As users experience losses in prediction markets, they may deplete the funds they would otherwise use for more traditional financial services, effectively removing themselves from the platform’s ecosystem entirely. This represents not just a loss of current revenue but the elimination of all potential future value from that user—a particularly costly outcome for platforms that have invested heavily in customer acquisition.
A Strategic Alternative: Growing With Users’ Financial Maturity
Rather than pursuing the allure of prediction markets, Santos advocates for a more measured approach aligned with users’ evolving financial needs. “If I were in the seat, I’d prioritize products users naturally want as they mature financially: credit cards, insurance, savings vehicles,” he suggested. “These are boring. The data suggests that’s precisely why they work. They are adjacent to the core relationship of managing household liquidity.”
This alternative vision emphasizes growing alongside users through their financial journey, offering products that address genuine needs rather than capitalizing on speculative impulses. Santos argues that financial “superapps” that prioritize user retention by treating churn as a primary risk factor will ultimately develop stronger competitive advantages and achieve better long-term outcomes. This approach may lack the immediate excitement and engagement metrics of prediction markets, but it builds a foundation for sustainable growth by focusing on users’ evolving financial requirements. By helping users manage and grow their assets rather than encouraging potentially risky speculation, platforms can foster deeper loyalty and create more enduring value—both for users and for the platforms themselves.
Conclusion: Balancing Innovation With Responsible Growth
The debate over prediction markets in financial applications highlights a broader tension in the fintech industry between innovation and responsible growth. While new features like prediction markets may generate excitement and immediate engagement, they raise important questions about the long-term responsibilities of financial platforms to their users. Santiago Roel Santos’s critique offers a valuable perspective that challenges industry leaders to consider not just what will drive engagement today, but what will create enduring value tomorrow.
As financial platforms continue to evolve and expand their offerings, the most successful may be those that strike a thoughtful balance—embracing innovation while remaining mindful of the potential impacts on user retention and financial well-being. In a landscape increasingly defined by short-term metrics and rapid feature expansion, Santos’s call for a more measured approach centered on users’ financial journeys serves as an important counterpoint. Financial platforms now face a critical strategic choice: pursue the immediate gains of prediction markets at the risk of accelerated user churn, or focus on building more sustainable relationships that grow alongside users’ financial lives. The outcome of this choice may well determine which platforms thrive in the long run.
