In a recent blog post, Santiago Roel Santos, the founder and CEO of Inversion Capital, expressed significant concerns regarding the integration of prediction markets into popular fintech platforms. He argues that this trend could prioritize short-term revenue generation at the cost of user retention.
Santos describes the introduction of these markets as fostering “casino-like” dynamics, which may heighten the risk of account liquidation for users. He emphasizes that the core issue is not merely that users may lose money, but rather that such environments accelerate user churn. “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,” Santos stated.
Current financial superapps are attempting to optimize their offerings in a manner similar to casinos, which serve just enough alcohol to keep players engaged without driving them away. Santos warns that this approach can lead to over-extraction of value from users, ultimately resulting in increased churn.
Growing Competition in Prediction Markets
This warning comes amid a surge in competition as several platforms announce their foray into event-based contracts. Recently, Coinbase revealed plans to introduce prediction markets through a collaboration with Kalshi, while Gemini secured a CFTC license to launch its own event contracts. Meanwhile, Robinhood has identified this niche as its fastest-growing segment after partnering with Kalshi to offer markets on NFL and college football.
The broader shift towards comprehensive financial platforms is prompting established players to incorporate prediction markets alongside traditional trading products. For instance, Interactive Brokers has introduced “yes-or-no” trading options in Europe, and Plus500 has entered the arena by clearing contracts for a CME and FanDuel-backed platform. Notably, monthly trading volumes on leading prediction market platforms Kalshi and Polymarket skyrocketed from less than 100 million dollars in early 2024 to over 13 billion dollars by November.
Despite this apparent success, Santos cautions that while prediction markets may boost near-term financial performance, they could destabilize platforms aiming to be comprehensive financial service providers. He highlights that apps like Robinhood gained traction due to their user-friendly interfaces and accessibility. However, as users mature, the real opportunity lies in evolving alongside them and addressing their broader financial needs rather than maximizing short-term profits during speculative peaks.
The Need for User-Centric Financial Products
Santos advocates for platforms to prioritize user retention by focusing on financial products that align with their evolving needs, such as credit cards and savings vehicles. These offerings, while less glamorous than prediction markets, could foster stronger user engagement and mitigate the risk of users losing their entire account value through liquidation.
He suggests that financial superapps that recognize churn as a critical risk and address it proactively will likely develop more robust competitive advantages and achieve sustainable long-term outcomes. The rise of blockchain-based prediction markets, especially during the 2024 U.S. elections, demonstrated their growing popularity, attracting both crypto-native exchanges and traditional finance entities eager to diversify their product offerings.
