Owning vs. Hoping: The Difference Between Investing and Gambling

Hi, everyone. I'm Liz Ann Sonders, and this is the April Market Snapshot. Thank you, as always, for tuning in.

This month's episode is a little more big picture, and on a topic that will likely remain evergreen, but it does have a tie-in to the current crazy market environment. In fact, I published a report on the subject this week as well, but I wanted a video version of it, so here we go.

There is a concept that has long anchored the philosophy of long-term wealth creation, which is owning. When you invest, you are generally acquiring a claim on future cash flows and on productive assets, on the compounding engine of capitalism itself. You are not wagering on an outcome and walking away with either a windfall or nothing. You are a participant in the ongoing enterprise of wealth creation, and that distinction matters more than it may seem at first glance, especially in today's environment.

Now, gambling operates on an entirely different logic. The gambler hopes. The investor owns. Both involve uncertain outcomes and both require accepting the possibility of loss, but the underlying architecture of each is fundamentally different. A diversified portfolio held through cycles and volatility historically has rewarded patience and discipline with real compounding returns. Although of course, past performance is no guarantee of future results. The house in casino gambling, a sports book or a prediction market is structured to help ensure that in the aggregate it wins and the participants in the aggregate do not.

This distinction has never been more important to articulate clearly. The youngest generation of investors is being inundated with the message that investing and gambling are essentially the same thing. The platforms and often the personalities delivering that message have worked hard to make the experience look and feel like a casino—emphasizing entertainment, instant gratification, the thrill of placing a bet on nearly anything these days.

[High/low charts for "Betting goes bonkers" for Prediction market monthly notional volume, number of transactions and number of users is displayed]

Prediction markets specifically have grown exponentially, as shown here. It's not just monthly volume growth, which has risen to more than $25 billion since 2024, and that's according to Dune. It's also total transactions which have skyrocketed from about 240,000 to more than 200 million, while monthly active users have grown from about 4,000 to almost 900,000. At the same time, a March 2026 report from Citizens JMP Securities covering the period from just last July, July 2025, to mid-March 2026, showed that prediction market users experienced higher losses than users of other gambling products, with a median loss of 8% compared to a loss of 5% for sports betters.

And the language often used to advertise these platforms is admittedly seductive. However, nearly absent from this messaging is any serious acknowledgement of the financial risks involved or any honest reckoning with what the data actually show about outcomes.

This is not a minor cultural shift. Frankly, it is a financial literacy crisis in the making.  UC San Diego Rady School of Management studied more than 700,000 online gamblers over five years through 2023, tracking digital payment records across 32 states. The researchers found that fewer than 5% of online sports gamblers have withdrawn more money from their gambling apps than they deposited. Let's flip that sentence. More than 95% of participants are net losers over time. This is not a feature of bad luck or poor timing. It is the mathematical inevitability built into these products by design.

There's also a landmark 2024 working paper titled 'Gambling Away Stability: Sports Betting's Impact on Vulnerable Households.' And it provides some of the most rigorous evidence yet of what is actually happening to household finances as online betting has spread across America. Using transaction data for more than 60 million Americans and analyzing behavior in roughly 230,000 households, and this is from 2010 through September of 2023, and the researcher's findings are jarring. When online sports betting became available in a state, participation spread quickly, and it did not slow down. Users who were net losers did not gradually learn their lesson and step back. Instead, they bet more. The research found not only an expansion among new users, but a pattern in which losing participants increased their wagering over time, a dynamic consistent with the addictive behavioral profile these platforms are designed, consciously or not, to cultivate.

Now, critically, the increase in gambling spending came at the expense of savings and investment. For every dollar directed towards sports betting, net investment in equities and other financial instruments fell by just over $2. The money flowing into these gambling sites was not discretionary leisure spending. It was likely wealth that would otherwise have been building toward longer term financial security. Now, the platforms are frictionless by design. A bet can be placed in seconds from a phone at two in the morning, however, the financial consequences are anything but.

And younger people today continue to see very solid, hard economic data—that's the actual economic data when we say 'hard'—but they feel very little, if any, benefits. That has helped pave the way for more speculative efforts to build wealth, with the belief that it can happen faster compared to what are thought of as more traditional methods, like purchasing a house or investing in the stock market.

[High/low chart for "Younger speculators" for Percentage of respondents agreeing with the statement "I invest, or may invest, in high-risk or speculative investments because I feel financially behind" is displayed]

There was a recent Harris Poll survey that provides supporting evidence for this. As shown here, when asked if they agree with the statement, 'I invest or may invest in high risk or speculative investments because I feel financially behind,' 80% of Gen Z respondents said yes. That compares to 75% of Millennials, 66% of Gen Xers, and 51% of my generation, the Baby Boomers.

Unfortunately, with stocks incredibly volatile under the weight of the war in Iran, more speculative money betting methods might look even more enticing to those who are seeing their portfolios struggle with these ups and downs in the market.

The conflation of investing in gambling, of course, is not entirely new. Critics of financial markets have made the comparison for as long as markets have existed, but there is a meaningful difference between a cynical critique and a deliberate business model built around blurring the line. Prediction markets and sports betting platforms are increasingly marketing themselves to the same demographic that the financial services industry is trying to reach with a very different message, one about the importance of saving, compounding, and investing for the long term.

For those who understand what they are doing and can afford to lose what they wager, responsible gambling is a legitimate form of entertainment. There is nothing inherently wrong with placing a bet on a football game, just as there is nothing inherently wrong with buying a lottery ticket. The problem arises when that activity is dressed up to look like a wealth-building strategy, when the risks are obscured behind engaging interfaces, social reinforcement, and when a generation of potential long-term investors comes to believe that outcomes are random, regardless of what approach they take.

[List of "Takeaways" is displayed]

Investing is a discipline. It involves goals, time horizons, risk tolerance, and the willingness to stay the course, especially when volatility makes that difficult. It's not about excitement or entertainment, though markets certainly provide plenty of both uninvited, especially in a week like this. Research does make it clear that dollars diverted from equity and bond markets and savings vehicles into betting platforms are not being redeployed into equivalent forms of risk-taking. They are being consumed. The expected value is negative. The platform generally wins. And the true cost is not just the losing bet. Generally, it is the compounded future value of the investment that was never made.

Now, let me conclude with a bit of a Schwab commercial. At Schwab, we are in the outcomes business. Our purpose is to help investors build and protect wealth over time, not to make the pursuit of financial security feel like a night in Las Vegas. The best thing we can do for the next generation of investors, particularly given the noise they are navigating, is to be unflinching about that distinction. Owning beats hoping, discipline beats speculation, and the long run, as it always has, belongs to those who invest in it.

Thanks, as always, for tuning in.