Philanthropist John Arnold has spent his post-Wall Street career tackling broken systems: infrastructure, higher education, criminal justice. His next target, he says, is the explosion of online gambling, which he worries has turned a tolerable-when-contained societal release valve into a frictionless casino — with potentially harmful effects on young men in particular.

His message to state officials who have legalized new types of betting: “You have a lot of lobbyists coming into your office every day talking about the benefits, but somebody needs to talk about what the negatives are,” he said on the latest episode of Semafor’s Compound Interest show.

Arnold became America’s youngest billionaire before closing his hedge fund in 2012, at age 38, to start Arnold Ventures with his wife, Laura. They fund research and advocacy with a lens that made Arnold one of the best gas traders of his generation: hunting out inefficiencies and bad incentives and bringing an ROI focus that wouldn’t be out of place on a trading floor.

His problem with betting markets is that they’re too easy. Gambling has historically been “high-friction, high-speed” (you can furiously pull slot machines for hours, but have to go to Las Vegas to do it) or “low-friction, low-speed” (for example, buying a lottery ticket at the grocery store, then waiting a few days to find out if you won.) Prediction markets combine the most pernicious of both, backed up by huge marketing budgets and gamified apps that push multipart bets known as parlays.

“They want you betting on the outcome of every play. It’s made it so much easier to gamble irresponsibly,” Arnold says.

Monthly trading volume on Kalshi and Polymarket, the two largest prediction markets, swelled from about $2 billion in early 2025 to $23 billion as of March. The negative effects are starting to show up. Researchers at the Federal Reserve Bank of New York found last month states that legalize sports betting see ensuing rises in consumer delinquencies. A separate study found that for every dollar wagered on sports, net investment in stocks and other financial instruments fell by just over two dollars, suggesting that consumers are frittering away money that could go toward building toward long-term wealth.

We also talked to Arnold about the energy effects of the Iran war and the broken economics of higher education.