Predictions, finance and a brewing storm of problem gambling

The global rise of prediction markets globally could throw a spanner in the works of gambling harm prevention and treatment programmes in countries like the UK, writes SBC News’ Editor, Ted Orme-Claye.

Driven by a combination of industry responsibility, regulatory pressure and public demand, betting companies in the UK have placed a much heavier onus on player protection, education and responsibility in recent years.

Prediction markets, however, are a relatively new phenomenon which bridge the gap between betting and financial trading – though some would argue that they are betting exchanges with a different skin.

It has also been documented that people working in financial services, particularly trading environments, may be more at risk of suffering from problem gambling and gambling-related harm than those working in other industries.

Yesterday, FT Adviser revealed that financial services and investment company Hargreaves Lansdown is asking potential investors about whether or not they have ever had a gambling problem as part of the screening process.

“Unexpected life events and personal circumstances can affect how someone manages their finances at any time,” a Hargreaves Lansdown spokesperson told the FT, in a statement also shared with SBC News.

“Our role is to ensure appropriate support is available whenever a client may need it. The information clients choose to share helps us tailor that support and continue improving the services we provide, giving all clients the confidence to save and invest.”

Financial services and problem gambling

While the Hargreaves Lansdown statement isn’t a solid indicator that investing and gambling are intrinsically linked, it does suggest that investment firms are keeping a close eye on potentially risky monetary behaviour by their clients – including excessive betting.

As with any academic research, there is no solid conclusion as to whether people in financial services are more vulnerable to problem gambling. On the one hand, some researchers determine that greater financial literacy means a reduced likelihood of problematic gambling.

Others, however, have pointed to the stresses and demands of working in financial services as being a potential cause of risky and escapist behaviour that could lead to problematic gambling.

The fact people living in trading often deal with risk-taking on a daily basis could also lead to some treating gambling as an extension of their job, according to other academics. 

Financial literacy and knowledge of markets could also have a negative impact, giving professionals more confidence in their decision making when placing bets on sports or gambling on cards.

The predictions link

So how does this link to predictions? Well, studies have also shown that while there may be crossover between the core product fundamentals of predictions and betting – placing money on the outcome of an event to get a return – there are differences in consumer profile.

Predictions customers are much more likely to be tuned into current affairs, the financial markets, technology industry, and political goings on than the typical sports bettor according to studies by the likes of Truist Securities.

Truist’s research of US predictions market users financial behaviour over the previous 12 months found that:

• 60% had traded stocks or ETFs
• 65% had bought or sold cryptocurrencies
• 43% had traded options or futures contracts

The research still found that a majority of predictions customers also engaged with conventional sports betting, with 73% stating they had participated in betting or fantasy sports.

However, the research overwhelmingly shows that there is a strong crossover between people with interests in investments and those with an interest in predictions.

In the UK, predictions have to be licensed as a gambling product.

This is how Matchbook, a long-time betting exchange, got its B2B predictions platform off the ground, with the firm now supporting EasyBet’s predictions product and FIFA World Cup partner ADI Predictstreet’s British operations.

The question the UK betting space now needs to ask is, after years of investment in player protection and responsible gambling campaigning, could the growth of predictions beyond their stronghold of the US accelerate problem gambling behaviour among the niche but prominent demographic of the financial services community?