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Vanguard’s boss has warned that prediction markets have become “a form of financial exploitation”, as concerns mount about widespread use of betting platforms and potential risks of manipulation.
Salim Ramji, Vanguard’s chief executive, told an audience at the Economic Club of New York on Thursday that there was a “really important distinction between investing and gambling”.
“You have too many platforms out there that are focused on engagement, and not focused on outcomes.
“You have too many people . . . in the industry out there that are representing speculation as a form of empowerment. Really, we see this as a form of financial exploitation.”
The comments from the CEO of the world’s second-largest asset manager come amid mounting scrutiny of popular platforms such as Kalshi and Polymarket that facilitate bets on everything from election results to the weather.
US broker Robinhood has excluded some prediction markets from its expansion into the sector over concerns about market abuse and insider trading.
This week, France’s weather forecasting service filed a police complaint after finding anomalies in its temperature gauges at Paris-Charles de Gaulle airport, which came at the same time as a rise in bets on Polymarket. In March, the FT reported that the US attack on Iran was preceded by a number of unusually large and well-timed bets on Polymarket.
Ramji said at the event on Thursday that one-third of Gen-Z — the tech-savvy generation born between about 1997 and 2012 — had either invested in prediction markets or considered doing so.
“On some level, if someone wants to do that with their fun money as entertainment, OK. The problem is when you ask why someone is doing that” and “they’re doing it because they think this is a fast path to financial security”.
Ramji argued instead for long-term investment and portfolio diversification, hallmarks of his $12tn-in-assets business offering low-cost products and ready-made funds to retail investors.
“The tension you have in the system right now is that you have a lot of people who have incentive, because that’s their business model, to try and tell people the opposite,” he said.
Ramji said asset managers could use new AI-led technologies to educate investors at scale.
“We’re a vocal force in being able to draw a distinction between investing and gambling,” he said. “But as those lines get blurrier, I think it can do certainly harm for the investors — but also harm to faith in the system.”
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