Betting on Getting Rich? The Role of Risk in Your Financial Plan

Minnesota recently enacted a law that would ban prediction markets such as Kalshi and Polymarket. A federal judge blocked the law before it took effect, and the legal challenge is continuing.

For now, prediction markets appear to be here to stay, and they’re just one of the growing number of ways consumers are being encouraged to put their money on the line. Sports betting is now widely available in much of the country. Meanwhile, prediction markets are expanding the definition of what you can wager on, from elections to the weather. And at the same time, investing platforms may be inviting you to get in early on the next hot AI company or other speculative investment.

There’s nothing inherently wrong with taking a financial risk. But it’s worth recognizing how many opportunities there are today to turn investing into entertainment—or gambling into something that looks like investing. These activities may be fun, and in rare cases, pay off, but they’re not a reliable strategy for building wealth.

If wealth is your goal, there are likely better places to put your money. That doesn’t mean you should never invest in something risky. You just have to think it through: Does the risk level make sense in your financial plan? And does the potential return justify the risk you’re taking?

The Odds Aren’t in Your Favor

For 26 years, federal law generally prevented states from authorizing sports betting, though a few exceptions applied. In 2018, the Supreme Court struck down the law, leaving states free to decide whether to legalize it. Today, sports betting is legal in some form in most of the country. In 2025, Americans staked $166.9 billion on sports bets and the industry took in almost $17 billion in revenue, according to the American Gaming Association.

The economics are straightforward: When you bet on a football game, you’re staking money on an uncertain outcome, with the potential payout set by the bookmaker to favor the house. If you lose the bet, you typically lose everything you wagered. Because the odds favor the bookmaker, placing more bets doesn’t improve your chances of coming out ahead over the long run. In fact, the opposite is often true.

That’s one of the biggest differences between sports betting and investing. With a traditional investment, even one that declines in value, you still own an asset that could recover or retain some value. A sports bet is different: It either pays out or it doesn’t. If you lose, the money is gone, and you have to put up more to make the next bet. That distinction can blur as betting becomes more accessible, entertaining and integrated into the financial apps people already use.

A New Face for Gambling

Prediction markets such as Kalshi and Polymarket take betting a step further. They let you buy and sell contracts tied to a wide range of uncertain outcomes. You could bet on whether a TV character will die in the next episode, who will win an election or whether the economy will enter a recession. Their payoff structure can resemble a sports bet, although people trade contracts with one another and may buy or sell them before an event is decided. But words like “markets,” “contracts” and “trading,” along with charts and graphs, can make the experience feel more sophisticated—more like investing than a sportsbook. The terminology may be different, but it doesn’t change the underlying uncertainty or improve the odds.

There are other risks, too. The regulatory status of prediction markets is still being sorted out, and outcomes tied to the conscious decision of a single person (say, an Oscar winner mentioning their dog in an acceptance speech) are vulnerable to manipulation or trades based on insider information.

The AI Get-Rich-Quick Pitch

The same dynamic can play out in the stock market, where speculation can be dressed up as investing.

In the late 1990s, companies added “.com” to their names to ride a wave of investor enthusiasm for the internet. Today, invoking AI is a favored way for companies looking to attract optimistic investors, even when the connection between the company and the technology is tenuous.

Consider the shoe company Allbirds. In 2026, it sold its footwear business, announced a pivot to AI infrastructure and changed its name to Smartbird, Inc. Its stock price subsequently soared nearly 600% in a single day. At the time, it had no operating track record in AI infrastructure. Shares later gave back much of that surge by late August.

The episode illustrates the danger of confusing a promising technology with a promising investment. AI may transform the economy, but that doesn’t mean every company associated with AI will succeed. Nor does a company’s use of AI in its marketing tell you much about whether its underlying business is sound.

Before investing, ask yourself a few questions: How does AI genuinely fit into the company? What does the company actually do, and how does it make money? Does it have real competitive advantage? Is the stock already priced for the best-case scenario? It’s easy to ask, “What if this company takes off?” But the important question is, “Is it worth the risk to find out?”

Aligning Risk With Your Goals

The common thread among sports betting, prediction markets and speculative investments is uncertainty. The packaging may change—a sportsbook, a trading platform or an AI stock—but the temptation is similar: Put some money down today for the chance to make much more tomorrow.

That can be exciting. It can also make it easy to lose sight of what your money is supposed to accomplish.

A good financial plan is designed around your long-term goals—not short-term results. It’s important to distinguish between money you’re putting to work for your future—where the goal is to make success as likely as possible—and money you’re putting at risk purely for fun.

If you have questions about how different kinds of risk fit into your financial plan, please reach out.