The rapid rise of prediction markets has sparked concerns among sports betting investors, yet new research indicates these platforms may not pose as significant a threat to traditional sportsbooks as previously thought. According to a report from Citizens Equity Research, approximately 5% of legal sports betting volume in the United States has shifted to event-trading platforms, which translates to around $8 billion in annual handle. Although this figure is noteworthy, it is not expected to alter the landscape for major operators in the industry.
Research compiled from over a million linked user transactions by Juice Reel reveals that while bettors might divert some funds to prediction markets, their overall wagering activity tends to increase. After engaging with these platforms, users reduce their standard gambling budgets by about 11%, but their total betting activity across various types rises by roughly 9%. Analysts interpret this trend as evidence that prediction markets are broadening participation rather than simply siphoning customers from established sportsbooks.
Jordan Bender, a leading analyst at Citizens, has expressed that investor pessimism may be overstated. He noted that the significant decline in stock prices observed in 2025 was disproportionate compared to the actual impact of market share loss. For major companies like DraftKings, FanDuel, and Fanatics, this shift in consumer behavior is unlikely to have a substantial financial effect, especially as these firms have developed their own prediction platforms to recapture users.
Challenges for Brick-and-Mortar Operators
While large online operators maintain a dominant position, traditional brick-and-mortar sportsbooks face greater challenges. Companies such as Caesars, MGM’s BetMGM, Penn Entertainment, and Rush Street may risk losing more customers to online markets due to their lack of similar product offerings. Concerns persist that launching online event betting could potentially undermine profits from physical casinos.
A significant contributor to the surge in prediction market activity is Kalshi, which reported monthly event-contract volumes exceeding $6 billion in both November and December 2023, driven largely by football betting demand and aggressive marketing efforts. Despite this notable growth, month-to-month increases have begun to plateau.
Another critical issue raised by the research is the financial well-being of users engaging with prediction platforms. Findings suggest that novice users often incur losses more rapidly on these platforms than on conventional sports betting applications. The average trade value exceeds $180, which is more than triple the amount typically wagered on sportsbooks. In contrast, experienced traders tend to perform better, leading to higher attrition rates among less successful users.
Overall, experts contend that while the emergence of prediction markets is notable, its current impact on sportsbook finances is limited. Bender likened this effect to the industry’s earnings decline stemming from a particularly unprofitable Monday Night Football game, suggesting that ongoing developments in the prediction market space may warrant closer attention but do not pose an immediate threat to established sportsbooks.
