Finance platforms racing to add prediction markets are doing so at the cost of accelerated “casino-like” user churn, says venture capital firm Inversion Capital founder and CEO, Santiago Roel Santos.
Santos argued in a blog post on Saturday that while he is a “believer in the underlying idea” of prediction markets, he thinks offering them in mainstream finance apps like Robinhood threatens future value capture by 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,” he said.
“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.”
Robinhood has been ramping up its focus on prediction markets over 2025, and crypto companies Coinbase and Gemini are also soon set to offer similar products that allow users to bet on events like sports and politics.
Santos said such offerings put too much focus on an area that will ultimately impact the app’s main use case; offering easy to use financial services to retail clients.
“Products like Robinhood succeed initially because they are simpler, more accessible, and more digitally native than incumbents,” he said.
“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 added. “If durability matters, you optimize for staying power.”
Source: Santiago Roel Santos
Blockchain-based prediction markets surged in adoption amid the US elections in 2024, with Robinhood initially jumping on the bandwagon back in March via a partnership with Kalshi.
Crypto exchange Coinbase announced on Wednesday that it was adding prediction markets as part of its “everything app” push in partnership with Kalshi, while an affiliate of Gemini won a US license to offer event contracts.
Santos ultimately thinks that while prediction markets will look good on the balance sheet in the short-term, they will later look much more fragile for financial apps as they will introduce a significant amount of risk that could destabilize users.
“Financial superapps that treat churn as a first-class risk will end up with stronger moats and better long-term outcomes,” he argued, adding:
“If I were in the seat, I’d prioritize products users naturally want as they mature financially: credit cards, insurance, savings vehicles. These are boring. The data suggests that’s precisely why they work. They are adjacent to the core relationship of managing household liquidity.”
