Are prediction markets a real threat to online sports betting?
Prediction markets may still be in their early days with much yet to be resolved among lawmakers and regulators, but they have already started trending among interested bettors, raising a real question over whether prediction markets are a threat to the existing growth of the sports betting sector.
The online gambling industry has seen a series of major changes in recent years as online betting continues to proliferate worldwide. More changes continue to come down the lane seemingly each month, and the latest involves the introduction and spread of prediction markets.
While still a betting mechanism, prediction markets offer a more flexible betting alternative that can allow players to bet on a wide variety of subjects and potentially change wagers in real-time. The rising popularity of prediction markets has led to questions over whether it may be pulling wagers away from other sectors, including sports betting.
Prediction markets are growing, but sports betting continues to dominate
While there’s no doubt that prediction markets have experienced rapid expansion despite being in their early days, sports betting continues to be a dominant force in the online betting space.
Major players such as Kalshi, Polymarket, and FanDuel Predicts have entered into predictions markets while expanding in multiple sectors, including sports. Kalshi and Polymarket combined have reported a total of $44 billion in trading volume, which is the total value of all contracts taken together, in the year 2025. Prediction markets currently have a regulatory advantage in that they can typically operate in markets where traditional sports betting or other niches are restricted, though that could change as regulators take notice of the industry.
For now, this sets it apart from traditional sports betting and makes it more lucrative for operators who want to expand in markets that aren’t yet otherwise served.
Despite this massive growth, analysts estimate that prediction markets hold only a modest 5% share of the overall industry’s wealth today.
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Operators and investors aren’t the only ones who have shifted towards prediction markets, as bettors may be drawn away from traditional betting sectors and more established online betting sites. Kalshi reported that sports-related contracts accounted for roughly 90% of its trading volume, highlighting a potentially drastic shift in sports wagering trends. Polymarket’s sports betting-based trade volume was a more modest 39%, which is still a significant amount.
Prediction markets as much as $700 million in daily trading activity. Any way you slice it, for those in this growing industry, there’s a lot to like and be excited about.
But the rise of prediction markets hasn’t come without some pushback. This is particularly evident across some US states. The state of Massachusetts, known for its high sports wagering revenue numbers, currently restricts prediction markets. State courts have ruled that sports-based contracts fall under existing gambling regulations, and the platforms must be licensed as such. This is an early example of how prediction markets could face increased regulatory scrutiny.
Regulators may question the framework of predictions markets, implementing the same restrictions on these platforms that existing sports betting operators must work under. This would dramatically affect the growth potential of predictions markets and related business.
While the numbers we’ve seen in predictions markets are massive for a growing marketplace, its number remain significantly smaller than those that traditional sports betting continues to generate. Virginia saw over $6.1 billion in total sports betting handle, and if other US states’ metrics are added up together, prediction market revenues would be dwarfed.
This highlights that while prediction markets have grown at an unexpected rate, they are not yet any real threat to the more mature and dominant sports betting industry.
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Khizar Mundia has been playing video games for as long as he can recall. Things have come a long way since the many days he spent playing the original NES, though. He now covers a variety of competitive games and esports, as well as the world of streaming, ranging from Twitch to Kick. If it’s of interest to gamers, it’s of interest to Khizar.
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