Written by: Daniel Crosby, Ph.D.
Betterment's 2026 Retail Investor Survey found that 52% of Gen Z investors had redirected money originally intended for long-term investing toward sports betting in the past year, and, stunningly, 26% now describe sports betting as a deliberate part of their long-term financial strategy.[1] Betterment's own CEO summarized the funding bluntly: "When a prediction market or sportsbook starts to feel like a retirement strategy, we have a problem."[2] Critics may poke holes in the survey methodology (I’m not sure 26% of those under age 29 even have a “long-term financial strategy”), but there’s clearly a larger issue here.
But before I go full old-man-yells-at-sky about betting markets and youngins’, let’s take a moment to give some recognition for what young people are doing well. Despite the stereotypes, today's 20-something investors may have a chance to become the wealthiest generation yet. The Economist even made the case that Gen Z is unusually wealthy, citing data from several financial think tanks showing that the typical Gen Z worker has experienced higher real incomes, stronger wage growth, and faster wealth accumulation than millennials and Gen X did in their early-to-mid 20s.[3] Just recently, Vanguard Group's 2026 How America Saves report found that 54% of workers under 25 contribute to a workplace retirement plan, up from 38% in 2017.[4] They have a lot going for them, but they still need guidance. Given the ability of wealth to compound with time, advice received at a young age has an outsized impact on future wealth outcomes.
Welcome to the Casino
The products competing for a young investor's attention share a common design logic even though they sit in nominally different regulatory categories: sports betting apps, options trading, crypto, meme stocks, prediction markets, in-play live wagering, and what industry insiders increasingly call "financial entertainment." How big is the casino? According to Betterment, legal U.S. sports betting alone grew from roughly $400 million in handle in 2018, the year the Supreme Court struck down the federal ban on state sports wagering, to nearly $167 billion in 2025.[5]
Uniting these otherwise distinct products is not their legal wrapper, but the reward structure underneath. We're talking about the dopamine hits of rapid feedback, variable outcomes, and a running scoreboard the user can check at any moment. The product may change from a same-game parlay to a call option on a meme stock, but the behavioral reward it delivers can be remarkably similar, which is why a generation raised on one is migrating easily toward the other.
Why Betting Feels So Good to Some People
Pete Rose was banned from Major League Baseball for wagering on games. Michael Jordan faced scrutiny for long nights at the tables. Phil Mickelson lost fans over his own gambling. Different arenas, different stakes, but the same pull. Gambling can reach across the boundaries of sports, celebrity, wealth management, and youth, drawing people toward the buzz of the next wager and the promise of what might happen.
The behavioral science behind the appeal is well established. None of it is new to gambling research, either. *Variable *reward schedules (payouts that arrive unpredictably rather than on a fixed timetable) produce more persistent, harder-to-extinguish behavior than steady rewards, a finding that traces back to operant conditioning research. Young investors experience variable reward schedules via modern trading and betting apps that replicate it using near-instant push notifications and price alerts. That unpredictability, paired with anticipation of a possible win, is closely tied to dopaminergic reward pathways in the brain, which is why the moment before an outcome is revealed (the parlay still live, the option not yet expired) are often reported as more exciting than the outcome itself. The thrill is the rush that comes with anticipation, not the win or loss.
Layered on top of this basic mechanism are several well-documented cognitive biases. Sensation seeking predicts a preference for volatile, lottery-like assets; Barber and Odean's foundational research on individual investors found that speculative trading is not only driven by information, but also by the entertainment value of trading itself, and that investors who traded the most earned meaningfully worse returns than those who traded the least, largely because of overconfidence in their own judgment.[6]
Taking it a step further, that overconfidence compounds an illusion of control, which is the belief that skill (not variance) drives results. Research on retail brokerage accounts finds a persistent preference for stocks with high idiosyncratic volatility and lottery-like payoff distributions. It's the same skewed-payoff appeal that makes a long-shot parlay so riveting.[7]
Recency bias adds fuel to the risk-taking fire. A recent win feels more predictive of future results than it is. Near-miss effects, well documented in slot-machine research, make narrowly losing outcomes feel almost as motivating as winning one ("Oh, I was so close. Let's go again!").
Social proof, perhaps most amplified today by platforms like Reddit's WallStreetBets, turns a private financial decision into a shared identity performance. We'll halt the bias train with* loss chasing*, increasing the size of a bet specifically to recover a prior loss. This behavior is almost identical in gambling and trading contexts and is one of the more reliable predictors of eventual serious harm.
The New Retail Investor
These mechanisms help explain a behavioral migration worth naming explicitly: from investor, to trader, to speculator, to bettor. We need to make that more salient, though.
· An investor asks what an asset is worth.
· A trader asks when to buy and sell it.
· A speculator asks which direction it might move next.
· A bettor asks only what happens next... a question stripped of any reference to underlying value at all.
Indeed, the line between these categories is about the question being asked, not the instrument being used. Think of it like this: A retail investor buying a common index fund (the Vanguard Total Stock Market Index ETF (VTI)) and a retail investor buying a 0DTE on the same ETF. The same broad exposure, but entirely different mental frameworks. It's easy to see the risk difference when confined to a brokerage account. The shift from investor to bettor is gradual, however, and often without the person involved recognizing when the underlying question has changed.
The Gamification of Investing
The migration has been intentionally accelerated by design choices in the trading apps themselves, not merely by the user. Robinhood is the poster child for this. To be clear, the burgeoning brokerage firm has done its share of good in the industry in recent years. A large swath of investors (beyond just Gen Z) chooses Robinhood to trade, invest, and grow their retirement savings. CEO Vlad Tenev works to make it a true competitor to stalwarts like Vanguard Group, Fidelity Investments, Charles Schwab and others. Still, the company's history cannot be ignored.
In 2024, Robinhood agreed to pay a $7.5 million fine to settle a case brought by Massachusetts securities regulators after an investigation found that its confetti animations, randomized "scratch-off" free-stock rewards, curated trending-stock lists, and push notifications functioned to encourage frequent, risk-laden trading among inexperienced investors, in violation of the state's fiduciary rule.[8] Separately, academic analysis of the same design elements notes that free stocks delivered in the visual form of a lottery ticket, paired with one-click execution, are built to trigger a response in the brain closely resembling that produced by gambling products.[9]
Calling it what it is, young men (even adolescents, in some cases) are particularly drawn to the thrill of real-time prices, the attention of constant notifications, the competition of leaderboards, the enticement of zero-commission trading, the measuring stick of socialized investing feeds and forums, and, as we now know, prediction markets. Each of these gamification elements compresses the feedback loop between action and outcome.
This compression is so critical because the frequency with which a person checks an investment's performance measurably warps their perception of risk. Someone seeing green or red daily experiences the same underlying volatility very differently than someone who checks quarterly. The more frequent checker is, by extension, more likely to react to short-term noise as though it carries long-term meaning.
The Psychology of the "Fun Money" Defense
Clients who engage in this behavior rarely describe it to their advisor in those terms, and the justifications they offer are worth taking seriously rather than dismissing.
· "It's only 5% of my portfolio" reframes the position as immaterial to the long-term plan. But the behavioral pattern it represents may not be.
· "I know what I'm doing" invokes competence, often sincerely felt, regardless of whether the track record supports it.
· "It's entertainment" turns financial decisions into a leisure expense, sidestepping the usual scrutiny applied to other investing facets.
· "I can afford to lose it" while sometimes true, is also sometimes a rationalization offered after the fact.
· "I'm investing in what I understand" is a bit of pseudo-intellectual larceny inspired by famed investor Peter Lynch, perverting language describing legitimate concentrated-conviction investing to justify what is, on closer inspection, more akin to a hunch.
So, when do these financial hobbies turn sinister and detrimental to an investor's financial plan and a person's mental health? The honest answer to when a small speculative allocation is harmless and when it is a gateway behavior is that the dollar amount is a poor predictor either way. The more reliable signal is escalation, whether the size, frequency, or intensity of the behavior is increasing over time, and whether losses are being met with an urge to make the position bigger rather than smaller.
What Advisors Should Do
Maybe the best place to begin is with what advisors should not do. The least effective response is probably a stern lecture about why gambling is foolish. We aren't going for a Dikembe Mutombo finger-wave here. It doesn't change behavior, and worse, it can shut down a conversation that could actually help.
A better approach begins by separating financial risk from behavioral risk. A client who puts 5% of a portfolio into speculative bets may not be putting their financial plan in serious jeopardy. But that doesn't mean the behavior is irrelevant. The more interesting question is what the gambling is doing for the client, and whether it is consistent with the life they say they want their money to support.
That means replacing the standard question, "Why are you doing this?" with something more useful: "What do you get from this?"
Maybe the answer is excitement. Maybe it's a sense of control. Maybe it's the satisfaction of testing one's skill. Whatever the answer, understanding the psychological payoff gives you something to work with.
From there, help the client create a clearly defined speculative budget. Give the behavior a place, but also give it a boundary. If the client agrees that $X is their entertainment or speculation budget, then exceeding that amount should require some deliberate friction: a waiting period before another wager, a conversation before increasing the size of a position, or simply a rule that the account cannot be replenished after losses.
The point isn't to eliminate risk. It's to interrupt the low-friction decision loop that modern betting apps and trading platforms are designed to encourage. A little distance between impulse and action gives the client a chance to think about what they're doing before they do it.
Another strategy that can work particularly well with risk-takers is scenario-based conversation. Instead of talking abstractly about odds and probabilities, walk the client through what a sustained string of losses would actually mean. What happens to the house they're hoping to buy? The retirement date they've chosen? The college funding they've promised their kids? The freedom they're ultimately trying to purchase with their wealth?
Human beings are often more responsive to vivid consequences than abstract statistics.
And you have another powerful tool at your disposal: the client's own history. Look honestly at what they have actually made or lost through sports betting, options trading, crypto speculation, or whatever form the behavior takes. Then compare those results with the goals and values they articulated when you began working together.
That is a conversation most clients won't have with themselves. And it may be far more persuasive than another lecture about probability.
From Gambling to Goals
The instinct to end a conversation like this by telling a client to simply stop is understandable. It is also unlikely to work.
Instead, ask a more interesting question:
"What are you really trying to get from this?"
The answers will vary, and each points toward a different underlying need.
Excitement. Maybe financial life has become predictable, and gambling provides a jolt of adrenaline.
Agency. Maybe the slow accumulation of wealth makes the future feel frustratingly out of their control, while a bet creates the feeling that they can do something about it.
Mastery. Maybe they don't want to simply accept market returns. They want to prove that they are good at something.
Connection. Maybe the bet isn't really about the bet. It is a shared ritual with friends, coworkers, or family.
Or, less flatteringly, it may be a shortcut. The client wants a level of wealth that patient, diversified investing seems too slow to deliver. The needs are real, even when the strategy for meeting them is not particularly helpful. And that's the opportunity for an advisor.
You don't necessarily need to take the excitement away. You can help a client find healthier ways to experience it. You don't have to eliminate their desire for agency. You can help them identify where they actually have control. You don't have to tell someone to stop wanting mastery. You can redirect that desire toward something that compounds rather than consumes.
The goal isn't simply to stop the bet. It's to understand what question the bet is trying to answer and help the client find a better answer. Because, like most of what we do, when you get underneath the behavior, the question is rarely about money at all.
[1] Betterment, 2026 Retail Investor Survey, conducted April 2026 among 1,000 U.S. retail investors.
[2] Ibid.; remarks by Sarah Levy, CEO, Betterment, as reported by InvestmentNews, August 2026.
[3] Generation Z is unprecedentedly rich. (2024, April 16). The Economist. https://www.economist.com/finance-and-economics/2024/04/16/generation-z-is-unprecedentedly-rich
[4] The Vanguard Group. (2026). How America saves 2026: 25th edition. Vanguard Workplace Solutions. https://workplace.vanguard.com/insights-and-research/report/how-america-saves-2026.html
[5] Betterment, 2026 Retail Investor Survey; American Gaming Association handle data as cited in coverage of the survey, August 2026.
[6] Barber, B. M., & Odean, T. (2000). Trading Is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors. Journal of Finance, 55(2), 773–806.
[7] Gao, R., et al. (2026). Robinhood: Simple App, Simple Stocks. Journal of Financial Markets (ScienceDirect); see also Barber, B. M., Huang, X., Odean, T., & Schwarz, C. (2022) on retail trading and speculative preferences.
[8] Massachusetts Securities Division consent order re: Robinhood Financial LLC, as summarized in Berkeley Technology Law Journal, "The Gamification of Investments," 2026.
[9] Brown University capstone research, "Robinhood's Behavioral Nudges: Gamification of Trading," cs.brown.edu.
Related: The Problem With Waiting for the “Right Time” to Invest
