Prediction Markets Are Becoming Retail Trading’s Next Dangerous Game

BusinessPrediction Markets Are Becoming Retail Trading’s Next Dangerous GameByDaniel Schlaepfer,Forbes Books Author.for Forbes BooksAUTHOR POSTExpertise and opinions of authors published by ForbesBooks. Imprint operated under license. | Paid ProgramJun 09, 2026, 11:29am EDTAs prediction markets gain popularity, young traders need to beware of the risks—and their sophisticated competition.gettySomething is happening in American finance that deserves far more attention than it is getting.Two industries — retail trading and prediction markets — are growing at extraordinary speed, capturing the time and money of millions of people, wrapped in the language of empowerment and democratization. They look different on the surface. One involves stocks and options; the other, event contracts that pay out $1 if you are right. But spend any time with both, and a striking picture emerges: they share the same user base, the same psychological architecture, and the same uncomfortable gap between how they are marketed and what they actually deliver.I have spent my career running Select Vantage Inc., one of the world’s largest human-driven proprietary trading firms. I have watched the retail trading boom from close range. And the more I learn about Polymarket and Kalshi, the two dominant prediction market platforms, valued at $8 billion and $11 billion, respectively, the more I feel an unsettling sense of recognition. The patterns are too similar to ignore.The Same People, Drawn to the Same ThingThe retail trading boom was not built on seasoned investors. It was built on young, digitally native users who had never traded before: people in their twenties and thirties, comfortable with apps, looking for action and upside. When sports paused during the pandemic, retail trading volumes surged. When professional sports returned, some of that volume migrated back. The psychological draw was essentially constant; only the vehicle changed.Prediction markets are drawing the same crowd. Polyma...