The BofA sounds the alarm on prediction markets
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2 Dec 2025 •
Reading time: 3 minutes The rapid rise of prediction markets, online platforms that allow users to bet on the outcome of real-world events such as sports matches, elections and news stories, is causing growing concern. In a recent note, the Bank of America (BofA) warned of the financial dangers they pose to both individuals and lenders.
A booming market
Since the federal ban on sports betting was lifted, prediction platforms such as Kalshi and Polymarket have seen a surge in popularity. According to the BofA, monthly trading volume on these markets has exceeded billions of dollars, fuelled by attractive mobile interfaces and mechanisms designed to encourage betting.
These platforms, with their modern and reassuring appearance, blur the lines. What used to be considered financial speculation is increasingly resembling a game of chance, where the temptation of quick wins encourages repeated, often disproportionate bets.
A hidden and growing risk
The BofA note identifies a particularly vulnerable profile: young men, often with modest incomes and limited financial literacy. Under these conditions, the easy access and addictive design of these platforms can lead to impulsive, even compulsive behaviour. The consequences are real: these users can get into debt through credit cards or personal loans, increasing the risk of default. Debit, late payments and even personal bankruptcy are not unlikely scenarios.
This finding is all the more alarming given that some academic studies show lasting structural effects: in US states that allow online gambling, the average credit score falls by around 1% in four years, while the risk of personal bankruptcy increases by 28% and debts sent to collection agencies rise by 8%. In addition, a survey cited by the BofA reveals that one in four gamblers has missed a bill payment due to their losses — a strong sign of financial fragility.
What worries the BofA is not only individual debt management, but the systemic impact on lenders — particularly those who finance subprime or low-income populations: consumer credit companies, student lenders, and personal loan institutions.
These institutions, historically far removed from the risks associated with gambling, must now contend with a new reality: a mix of entertainment and speculative finance, in the words of the bank’s strategists.
A chain of repayment defaults, an increase in bad debts, a deterioration in the credit portfolio… These are just some of the threats now hanging over the traditional financial sector. And with them comes the need to review risk assessment models, which until now have been calibrated on more traditional bases.
Platforms defend their model
On the other side of the fence, Kalshi and Polymarket claim the status of regulated exchanges, notably under the supervision of the Commodity Futures Trading Commission (CFTC), ensuring transparency and oversight. For them, this is not gambling, but alternative financial markets.
However, this does not erase the warning signs: the massive losses suffered by 84% of users, as mentioned in some reports, show that very few actually profit from these activities — the rest are exposed to losses, sometimes significant ones. Faced with this ambiguity, policymakers, regulators and lenders must clearly define the framework. Behind every speculative contract, there is often a real person betting more than they can afford.
As the BofA points out, easy access and gamified interfaces encourage frequent and impulsive betting — a simple warning, but potentially a sign of a much bigger problem.