Rick,
I want to start where I think you are right, because this is not a disagreement about principle.
At Schwab Impact last fall you told a room full of advisors that you do not want young people in this country believing a bet on the Monday Night Football game is equivalent to being invested in stocks and bonds for the long term. In February you called sports wagering "counter to our mission," and said plainly that people generally do not get better off in their financial life through gambling.
I agree with all of it. We custody at Schwab in part because that instinct is real there and not merely stated. The conflation of gambling and investing is the defining retail-behavior problem of this decade, and a custodian that refuses to monetize it is a custodian worth building a practice on.
But in that same conversation you made a second observation: firms which built prediction-market capabilities around economic events like employment and inflation reports found "there is not a lot of interest in these events with the general public."
That is almost certainly true. It is also the wrong audience to have measured. The demand for economic event contracts was never going to come from the general public, because the general public does not hold duration risk it needs to manage. Advisors do. And Schwab, more than any other firm in the country, is where those advisors live.
The problem these contracts actually solve
The hard part of our job is not forecasting the data. It is forecasting the reaction to the data.
An advisor can be right about a soft payroll print, right about a hot CPI, right about the direction of Fed policy — and still position the portfolio exactly backwards. The market’s response to a given surprise is not stable. Boyd, Hu and Jagannathan documented this in the Journal of Finance two decades ago: rising unemployment news pushes stocks up during expansions and down during contractions. Same data, opposite sign, depending on a regime you can only identify in hindsight. McQueen and Roley found similar instability earlier. Even more recent Federal Reserve research arguing that these reactions are more stable than we thought gets there only by using the complete set of macro surprises at once, which is precisely the information an advisor does not have on the morning of a single release.
So we run a two-step process where only the first step is a skill. Step one: form a macro view. Step two: guess how the tape will interpret it. Step two is where the value gets destroyed, and there is currently no instrument that lets us skip it.
The view we cannot express
Take the position in front of every advisor right now.
For months our read has been that the Fed is moving toward a hike. That read has been borne out: not by a hike, which has not happened, but by everything that precedes one. The July minutes showed officials seeing a need to raise if inflation does not cool. Official commentary through the summer has grown steadily more hawkish. And at Jackson Hole on August 28, Chair Warsh sharpened the inflation warning far enough that analysts read it as putting a hike squarely on the table.
The market agreed, immediately and measurably. Kalshi’s contract on a Fed hike before 2027 opened this year at 13 cents. It was 46 cents at the end of June, 71 at the end of August, and 87 by mid-September. CME’s FedWatch tool tells a version of the same story. That is a directional view, correctly held, and confirmed in public.
So here is the hard part: what do you actually do with it?
There is no instrument that expresses "the Fed is moving toward a hike." There are only proxies, and every one of them smuggles in a second view. Extend duration and you have taken a position on where the long end goes, which is a different question with a different answer. Over the very stretch when hike odds went from 13 cents to 75, long yields rose rather than fell, with the 30-year touching 5.31% in August, its highest level since 2007. Trade the curve and you have added a view about relative moves. Use options and you have added volatility and time decay to a thesis that contained neither.
That translation step is where advisor conviction goes to die. Not because the analysis was wrong, but because the instrument was.
A yes/no contract on Fed policy collapses the entire problem. The view and the position become the same object. Maximum loss is known at entry. No margin, no decay, no path dependency, no guess about how the tape will read a press conference. Either the Fed hikes by December 31 or it does not.
And this is not a thin or theoretical market. That single contract has traded more than three million contracts this cycle, with over a million in open interest. The liquidity already exists. It simply exists somewhere Schwab advisors cannot reach it.
I am not arguing anyone should buy that contract, and nothing here is a recommendation to do so. I am arguing something narrower and, I think, harder to dismiss: the instrument that most cleanly expresses a mainstream professional view is the one instrument we have no way to access on behalf of clients.
I cannot send clients to Kalshi to manage interest-rate exposure. I would not, and neither would any advisor who takes fiduciary duty seriously: different account, no supervision, no reporting, no visibility into the plan. But had that contract been available at Schwab, it could have been a small, defined-risk sleeve inside the managed account, sized deliberately, reported alongside everything else, and considerably cheaper than the options structures we would have to assemble to approximate it.
That is not speculation. That is the most direct expression available of a view we already hold and already act on, less precisely, somewhere else.
Schwab has run this play before
When bitcoin ETFs came to market, Schwab made two decisions that looked contradictory and were actually coherent. It declined to launch its own product. And it let advisors buy IBIT for clients on day one.
That combination was exactly right. Schwab did not manufacture the exposure or promote it, but it also did not force assets out the door to a venue with no supervision. Advisors got a tool. Clients got the exposure inside a plan, with a fiduciary sizing it. And Schwab kept the assets, the visibility and the relationship. That last piece is what actually protects clients from the behavior everyone is worried about.
Every argument that made that the right call applies here with more force, because the underlying risk — rates, inflation, employment — is one advisors are already managing, with arguably more complex instruments.
The line as currently drawn is backwards
Today Schwab is entering prediction markets through S&P 500 and XSP binary options with Cboe, while economic event contracts remain off the table.
I understand the caution on sports and politics, and I would support holding that line permanently. But consider what the current configuration actually says. A one-day binary on the S&P 500 is, for most participants, closer to a coin flip than a Fed decision six months out will ever be. The contract Schwab is comfortable offering has the shortest horizon, the thinnest informational content and the highest turnover. The contracts it will not offer have long horizons, real analytical content and obvious hedging utility for professional allocators.
If the organizing principle is gambling versus investing, the line has been drawn on the wrong side of it.
A phased path, and a bigger prize
There is a sequence here that lets Schwab move deliberately rather than all at once.
First, Fed policy. Long-dated, deeply analyzed, and a direct hedge against duration risk sitting in millions of Schwab-custodied portfolios. Advisor-first, with position limits and sleeve-level sizing guidance.
Then the macro releases. CPI and payrolls. Same logic, shorter horizon, still squarely a portfolio-management tool.
Eventually, corporate events. This is where the client-protection argument gets loudest. Look honestly at how much retail money is currently destroyed in weekly options around Apple and Tesla earnings: undefined outcomes, brutal decay, structures most buyers cannot price. If those same clients could instead trade "Apple beats" or "Tesla misses on deliveries" as a plain-English contract with a known maximum loss, you would have made the client experience simpler and removed a genuinely gambling-shaped product from their reach. That is a reduction in speculation, not an increase.
What I am asking for
Not a launch. A hearing.
Before Schwab concludes that demand for economic event contracts is not there, put the question to the advisor council and to the RIAs who custody with you. Ask whether a defined-risk, low-cost sleeve tied to Fed policy or CPI would improve how we manage client money. Ask what we currently pay to approximate the same exposure. I would expect a materially different answer than the one the general public gave.
You said in February that prediction markets "offer you insights into the probability of different events," and that Schwab might one day share that probability data with clients. I would go one step further: let us act on it, inside the account, where someone with a fiduciary obligation is sizing the position and the custodian can see the whole picture.
Done with discipline, this is a win in every direction: for Schwab, for the advisors who custody there, for our clients, and for the retail investors who will otherwise find these markets on their own, somewhere with far less care taken.
It is worth a closer look.
Kevin Kleinman
Financial Advisor, Blue Haven Capital
Sources
- Rick Wurster on prediction markets and gambling, Schwab Impact (November 2025) — InvestmentNews
- Wurster on prediction markets and sports betting (February 2026) — The Block
- Schwab enters prediction markets with S&P 500 event contracts via Cboe (June 2026)
- Chair Kevin Warsh, keynote remarks at the 2026 Jackson Hole Economic Policy Symposium (August 28, 2026)
- Warsh sharpens inflation warning at Jackson Hole, signaling possible rate hike — CNBC
- July 2026 FOMC minutes: officials saw need for a rate hike if inflation does not cool — CNBC
- CME FedWatch Tool — market-implied path for the federal funds rate
- FOMC minutes, June 16–17, 2026 — target range held at 3.50%–3.75%
- 30-year Treasury yield tops 5.31%, highest in 19 years (August 17, 2026) — CNBC
- Kalshi: "Will the Federal Reserve hike rates by December 31, 2026?" (FEDHIKE-26DEC31) — prices cited as of September 12, 2026
- Boyd, Hu & Jagannathan, "The Stock Market’s Reaction to Unemployment News" (2005)
- McQueen & Roley, "Stock Prices, News, and Business Conditions" (1993)
- Modugno & Palazzo, "Decoding Equity Market Reactions to Macroeconomic News," FEDS 2025-007
This article reflects the opinions of Blue Haven Capital and is for informational purposes only. It is not a recommendation to buy or sell any security or contract, and it is not investment advice. Any figures cited are illustrative of a market observation, not of client account performance. Past performance does not guarantee future results.
