MW Are you investing or gambling? Here's how to tell - plus advice on how to find the right balance.

By Gordon Gottsegen

It can be hard for investors to know where to draw the line between what feels like investing - and gambling. Here's help.

Savvas Avramidis is worried about the price of eggs, but not because their increasing cost will make his grocery haul unaffordable. The 35-year-old from Chicago has made a bet on the Kalshi prediction market that the price of eggs will go down.

"Will egg prices go up in Trump's first month in office?" was one of the "markets" that people were putting money on at Kalshi, and Avramidis was betting $2,443 that the answer would be "no."

When Avramidis decided to make the bet, he thought the semantics of the question on Kalshi were important. He noted that egg prices generally drop in February, and the results of the bet would be determined by data that the Bureau of Labor Statistics reports in mid-March on average egg prices in the months of January and February. That doesn't line up exactly with President Trump's first month in office, so Avramidis believed that framing the question around Trump created a distraction that might trip up some bettors and make the odds better for him.

"I've learned with these event contracts that you really need to be a critical thinker and not jump to any sort of conclusion," Avramidis told MarketWatch.

A growing number of individual investors like Avramidis are leaning into risk, gravitating to new, riskier products offered by financial companies that are blurring the lines between investing and gambling. These include particularly perilous options contracts and meme coins, and now event contracts, which allow users to bet against one another about the outcome of certain episodes.

The rise in popularity of these products is fueled in part by the economic experiences of Gen Z and millennial men, who perceive that stable paths to prosperity have disappeared. The result is a growing culture around "degen" traders - an ironic riff off of the term "degenerate gambler" - who represent a societal shift in the way people view investing.

This behavior wouldn't be possible if it weren't for the financial companies that are making riskier trading strategies more accessible. Kalshi even moved in February to introduce event contracts on single-game sporting events, touting that it was bringing "100% legal sports trading to all 50 states," at a time when sportsbooks are not legal in every state. Since it's a financial exchange where people bet against each other - and not a betting sportsbook in which gamblers wager against the house - Kalshi noted that it's regulated by the Commodity Futures Trading Commission at the federal level and not by state gaming commissions.

Kalshi markets its event contracts as an "asset class"-but even some people who trade on the platform say it sounds more like gambling.

"Obviously this is not an investment," Ann Heslin, an investor from New York who used Kalshi to bet on the 2024 U.S. presidential election, said about event contracts. "It's adjacent to, 'Where can I put my money and see what happens to it?'"

The advisors

It can be hard for investors to know where to draw the line between what feels like investing and what feels like gambling.

"That line has started to get a little bit more blurred," Caroline Piehl, CFP, financial advisor and partner at TimeWise Financial, told MarketWatch. "Investing can actually feel like and simulate gambling, depending on what you're investing in and what your decision-making process is."

Financial advisors often give their clients a priority checklist for them to help plan for their financial future.

For Wendi Henry, the president of WealthSmyth Agency, this checklist starts with building up an investor's emergency savings, which can be accessed if they lose their job or some tragedy occurs. Next comes saving up for big planned expenses, like a vacation or new car. After that, they should be investing for their retirement, which can involve building a portfolio of fixed income, low-cost ETFs or other securities depending on the investor's age and risk tolerance. Henry said that once investors have those things figured out, they have more freedom to invest in whatever they want.

"[Investments] outside of that could really be anything," Henry said. She thinks investors should divide their portfolios into two buckets: "safe" money and "play" money. Safe money is saved up for important expenses or invested for retirement. Meanwhile, play money allows investors to take risks to seek larger gains.

Once investors are comfortable with where their finances stand, they can start experimenting with things like event contracts, financial derivatives, crypto or alternative investments - as long as they're okay with losing all of that money in the worst case scenario.

If interested, Piehl said that a good rule of thumb would be putting anywhere from 2% to 5% of your total portfolio into one of these more speculative investments.

"You're only putting a certain percentage of your money into that. So if it goes 100x then that's great. But if it goes to zero, then at least you still have 95% of your money there for your retirement," Piehl said.

If investors want to try their luck with speculative investments for the first time, Henry recommends talking to other investors who already have experience in that space.

"Talk to someone who's done it, and I don't mean an advisor. I mean someone who's invested in real estate, or someone who's invested in futures, call options, put options, whatever," Henry told MarketWatch. She said the advice coming from a financial advisor or professional like herself might not be as candid as the advice coming from another investor, who's willing to talk about the cuts and bruises they gained along their investing journey.

When it comes to using new financial products or derivatives, Piehl said that the more investors know about the investment vehicle they're using, the more they are setting themselves up for success.

"There are professionals that don't fully understand options trading and futures trading," Piehl told MarketWatch. "So if you don't know what you're doing, then that could be a huge problem."

Learning more about what you're investing in puts the odds more in your favor. Piehl described this with a casino metaphor. It's generally considered financially unwise to go to a casino and put all your money on a blackjack table or in a slot machine. That's because the games are set up where gamblers are more likely to lose. But if you're the house, or you're the company running the casino, you've designed the games to work out in your favor more often over the long run. Whether it's stocks, crypto, event contracts or derivatives, Piehl said that investors should try to find ways to win over the long run.

Humans have been gambling for thousands of years. So telling people to completely avoid risking their money for potential gain is a moot point. Taking extra risk is sometimes necessary, so it's not a black-and-white argument.

There's also an element of excitement that comes with taking risks, which is one of the reasons investors are drawn to gambling. But Henry cautioned that investors should be aware of the costs that come with that excitement. This could come in the form of fees charged in order to make an investment. For example, Kalshi charges fees on a per contract basis, which is something that traders should keep in mind when trying to calculate their potential profits and losses. Henry said investors should ask themselves, "Am I paying to play?"

The gamblers

Before Avramidis was betting on egg prices, he was betting on sports. He said his first foray into sports betting began during the 2022 FIFA World Cup in Qatar; one of the first games he bet on featured Qatar's national team playing against Ecuador.

Before the game, Avramidis saw that Ecuador was designated the underdog by the sportsbooks, and that there were vague rumors that the Qataris would pay Ecuador to lose on their home turf. But for Avramidis, this made the Ecuadorean team a better bet for the higher return. He put his money on Ecuador, and won comfortably.

After a few years of sports betting, Avramidis first tried Kalshi in November 2024 as a way to make money off the outcome of the U.S. presidential election. Despite the new format, he took the same approach he had with sports betting to Kalshi. For Avramidis, this means placing bets when he thinks the expected value is lower than it should be. With the World Cup game, that meant betting on the underdog when they were objectively more competitive than the sportsbooks suggested.

Avramidis' most successful bet on Kalshi was a wager that Joe Biden would pardon his brother James before leaving office. The Kalshi market priced in a very low chance that Biden would pardon his brother, but after doing a couple hours of research, Avramidis thought a pardon was very much on the table. Avramidis bet $9,220 that Biden would pardon his brother, and won $27,456 when Biden issued the pardon with hours left in his presidency.

When asked if he considered these wagers on Kalshi investing or gambling, Avramidis said "it depends."

He said that when he used Kalshi to bet that the Philadelphia Eagles would win last month's Super Bowl, it was indeed gambling. He noted that sports tend to have many variable factors that could influence the outcome of the game, making it hard to say for certain what the result will be in the end. But he viewed his wager on the James Biden pardon more akin to investing, due to the research he conducted on the topic and how confident he was with his call.

The way Avramidis saw it, Republican Rep. James Comer of Kentucky had written a letter imploring Pam Bondi, the Trump administration's incoming attorney general, to prosecute James Biden - and President Biden would likely take care of his brother in the face of such calls.

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April 07, 2025 09:30 ET (13:30 GMT)

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