Bank of America Issues Warning on Prediction Markets

Bank of America has issued a warning about prediction market betting.

Prediction markets are the hot topic on everyone’s lips at the moment in the US. The likes of Kalshi and Polymarket are shaking up the booming sports betting market, allowing customers to wager on everything from sports games to politics.

Concerns Over Consumer Debt and Credit Quality

Now, the Bank of America (BOA) has warned that these platforms could post a risk for lenders and those taking on loans. The financial firm said that consumers might end up taking on too much debt and defaulting on loans as a result of placing bets on the platforms.

A BOA strategist said that “easy access and gamified interfaces encourage frequent and impulsive wagers.” Concerned parties think this could “pressure credit quality, increase delinquencies, and impact earnings for issuers and subprime lenders.”

Research Highlights Rising Bankruptcy Risk

BOA referenced research from UCLA Anderson and USC which highlights troubling trends in states that permit online betting. Among other findings, the research claimed that on average “the likelihood of bankruptcy increases by 28%” in these states, while “one in four bettors report missing bill payments.”

Major Sportsbooks Move Into Prediction Markets

Despite the supposed risks to consumers, the major established sportsbook brands are now making their moved in the prediction markets. FanDuel and DraftKings dropped ties with the American Gaming Association earlier this month, cementing their decision to enter into prediction market betting.

The move came shortly after shares in the two operators fell as the BOA downgraded them from Buy to Neutral. The downgrade was prompted by the rise of prediction market platforms, with Kalshi and Polymarket taking large chunks out of FanDuel and DraftKings’ market share.

Penn Entertainment CEO Jay Snowden even thinks these prediction markets might begin offering slot gaming before long.