Prediction Markets Pose Limited Threat to Traditional Sportsbook Industry
Minimal Threat from Prediction Markets to Major Sportsbook Operators
Recent analysis shows that although prediction markets have experienced rapid growth recently, they do not pose a significant threat to established sportsbook companies. Research from Citizens Equity Research highlights that only about 5% of legal US sports betting volume, equivalent to roughly $8 billion annually, has shifted to event-trading platforms. While this shift is noticeable, it is not substantial enough to drastically change the landscape for leading operators.
Data compiled from over one million combined user transactions via the Juice Reel aggregator indicates that while some bettors allocate funds to event-trading platforms, their overall betting activity increases rather than simply shifting funds. Specifically, users reduce their traditional gambling spend by about 11% after engaging with prediction markets, but their total betting volume across all platforms rises by approximately 9%. This suggests prediction markets are expanding overall participation rather than cannibalizing existing sports betting revenues.
Established Operators Remain Confident Amid Market Changes
Jordan Bender, a senior analyst at Citizens Equity Research, comments that market pessimism among investors is overstated. He notes that the decline in stock prices seen as early as 2025 was more severe than the actual loss in market share for sportsbooks. Major companies such as DraftKings, FanDuel, and Fanatics operate their own prediction platforms, allowing them to retain customers who might otherwise leave. Moreover, these companies dominate more than 75% of the legal US betting market, providing additional resilience against competition.
Brick-and-Mortar Operators Face More Challenges
Operators with substantial physical casino presences, including Caesars, MGM’s BetMGM, Penn Entertainment, and Rush Street, are more vulnerable to losing customers to online event-trading platforms. These companies have been slower to develop their own prediction market offerings, likely due to concerns that online event betting could undercut their in-person casino revenues.
A key driver of recent market growth is Kalshi, which saw monthly event contract volumes exceed $6 billion during November and December, fueled by demand related to football and extensive marketing efforts. However, growth rates have recently begun to plateau.
User Behavior and Financial Outcomes in Prediction Markets
The report also raises concerns about user profitability on prediction platforms. New users tend to lose money more quickly compared to traditional sports bettors, largely because the average trade value on prediction markets exceeds $180—more than three times the average sportsbook wager.
Experienced traders perform better, which results in less successful participants tending to exit the market sooner. Overall, analysts conclude that despite rapid growth, prediction markets currently have a modest financial impact on sportsbooks, similar to minor fluctuations from specific events like unprofitable Monday night football games.
