Investors have expressed concern over the rapid rise of prediction markets, yet a recent report indicates that these platforms are not significantly disrupting traditional sports betting operators. According to research from Citizens Equity Research, approximately 5% of legal sports betting volume in the United States has shifted to event-trading platforms, equating to roughly $8 billion annually. While this figure is noteworthy, analysts believe it is insufficient to alter the financial outlook for major sportsbook operators.
Though the movement of funds to these alternative betting formats is evident, it remains limited in scope. Insights derived from over one million linked user transactions collected by the Juice Reel aggregator reveal that while some bettors are experimenting with event-trading platforms, their overall gambling expenditure has increased. Specifically, users reduced their traditional betting budgets by about 11% after engaging with prediction markets, yet their total betting activity across all platforms grew by approximately 9%. This trend suggests that prediction markets are enhancing overall participation in betting rather than merely siphoning off customers from established sportsbooks.
Analyst Jordan Bender of Citizens has urged investors to temper their pessimism. He highlighted that the stock price declines in 2025 far exceeded the actual financial impact of the market share transition. Bender argued that for large companies such as DraftKings, FanDuel, and Fanatics, the changes in user behavior have minimal financial ramifications. These companies have developed their own prediction platforms, allowing them to recapture users who might experiment with other options. Furthermore, their control of over 75% of the legal betting market in the U.S. offers them substantial resilience against potential losses.
Challenges for Brick-and-Mortar Operators
The situation appears more precarious for traditional operators with extensive physical locations, such as Caesars, MGM’s BetMGM, Penn Entertainment, and Rush Street. These businesses face a higher risk of customer attrition to online markets. Experts suggest that many of these companies have hesitated to launch their own prediction platforms due to concerns that online event betting could adversely affect profits from their physical casinos.
A significant contributor to the increase in prediction market activity is Kalshi, which saw its monthly event-contract volume surpass $6 billion in November and December. This surge can be attributed to heightened interest in football betting coupled with aggressive marketing strategies. Nevertheless, growth has begun to plateau, raising questions about the sustainability of this momentum.
As user engagement evolves, financial outcomes for participants also warrant attention. The study indicates that newcomers to prediction platforms tend to incur losses at a faster rate compared to those using traditional sports betting applications. This is primarily due to the average trade amount exceeding $180, significantly higher than typical bets placed with sportsbooks. More experienced traders, however, have demonstrated greater success than casual users, leading to a tendency for less successful participants to withdraw from these platforms.
In summary, industry experts assert that while the prediction market sector is expanding rapidly, its current influence on the financial performance of sportsbooks remains limited. Bender likened this situation to the sporadic revenue declines experienced during unprofitable events, such as a Monday night football game. The landscape continues to evolve, but as it stands, traditional sportsbook operators retain a stronghold on the market amidst these emerging trends.
