Venture capital veteran Santiago Roel Santos is warning that the race among finance platforms to add prediction markets could come at a steep cost: accelerated, “casino-like” user churn that erodes long-term value.
In a weekend blog post, the founder and CEO of Inversion Capital said he’s a “believer in the underlying idea” of prediction markets, but argued that integrating betting-style products into mainstream finance apps risks turning users into short‑term speculators who are more likely to be liquidated and lost altogether. “The problem with casino-like products isn’t that users lose money. It’s that casinos accelerate churn,” Santos wrote. “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 warning comes as major retail platforms move aggressively into event betting. Robinhood has been expanding prediction market offerings into 2025, while crypto exchanges Coinbase and Gemini are preparing similar launches. Blockchain-based prediction markets saw a big spike in activity around the U.S. elections in 2024, and Robinhood first signaled interest in the space in March through a partnership with Kalshi. Coinbase announced partnering with Kalshi to add prediction markets as part of a broader “everything app” strategy, and an affiliate of Gemini has secured a U.S. license to offer event contracts.
Santos frames the issue as a strategic trade-off. Products like Robinhood disrupted incumbents by being simpler and more accessible, he noted — traits that help onboard large numbers of retail users. But he cautioned that capturing lifetime customer value depends on helping users grow their financial lives, not maximizing revenue during episodes of peak speculation. “If durability matters, you optimize for staying power,” he said.
His broader point: prediction markets may boost short‑term engagement and look attractive on a balance sheet, but they also inject volatility and liquidation risk that can destabilize user bases. “Financial superapps that treat churn as a first-class risk will end up with stronger moats and better long-term outcomes,” Santos concluded.
For crypto platforms and neo-brokers targeting mass retail audiences, the trade-off Santos outlines raises a key strategic question: pursue quick product‑driven growth via prediction markets, or prioritize stickiness and long-term customer relationships — even if that means passing on the short-term upside of casino‑style offerings.
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