The fast rise of sports activities prediction markets took first place for the most important story within the U.S. betting business final 12 months. Don’t count on the momentum to drop off in 2026.
Businesses providing contracts on sports activities occasions are actually being valued in the billions. But whereas their water cooler dialog worth has been priceless for business insiders, they continue to be considerably of an unknown to the typical sports activities fan.
Proponents of prediction markets, by which individuals commerce contracts tied to the results of future real-world occasions, describe them as a revolutionary asset class and, within the phrases of Kalshi CEO Tarek Mansour, a “truth machine.”
They declare the markets are extra correct than polls or different statistical prediction fashions, whereas being helpful as a device to hedge in opposition to the monetary results of real-world occasions.
Critics counter that sports activities futures buying and selling is not any totally different than playing and have to be regulated and taxed as such on a state-by-state foundation. Since December 2024, sports activities prediction markets have been obtainable in all 50 states, overseen by the federal Commodity Futures Trading Commission (CFTC) regardless of authorized challenges.
Below, Sportico solutions key questions on prediction markets.
What is a prediction market?
Prediction markets permit individuals to stake cash on the outcomes of real-world occasions: elections, papal conclaves, film evaluation scores and sports activities—which is extra common now than every other style.
They are provided within the type of “yes” and “no” contracts. As in, “yes,” the New York Mets will win tonight. Or “no,” President Donald Trump won’t say “China” in his subsequent speech.
Prediction markets involving all kinds of subjects have operated internationally for many years.
In the U.S., sports activities has taken off because the dominant prediction market menu merchandise as laws have loosened. Crypto.com turned the primary to supply sports activities contracts nationwide in late December 2024, in opposition to the needs of the departing Joe Biden presidential administration. Kalshi adopted swimsuit in January 2025. Each knew the incoming Trump administration could be extra permissive.
Before Crypto.com and Kalshi, solely Sporttrade had energetic sports activities prediction markets within the U.S., albeit with a special method. Sporttrade operates in simply 5 states with oversight from state gaming regulators. The Pennsylvania-headquartered firm has agreed with state governments that its prediction markets are a type of sports activities betting.
However, Sporttrade is now pushing for entry to each state below the federal regulatory mannequin to keep away from struggling what it claims could be “irreparable harm” from rivals. The firm hopes the state regulators it has lengthy labored with perceive its predicament.
How do prediction markets work?
Prediction markets provide contracts at all times priced at a fraction of $1. The costs correspond with the dwell chance of an occasion end result occurring, as decided by what the general public believes at a given second. The nearer to $1 the contract is, the upper the anticipated chance of it occurring—but in addition the decrease the potential revenue for consumers.
If the general public determines there’s a 40% likelihood of an occasion occurring, corresponding “yes” occasion contracts are priced at about $0.40 earlier than buying and selling charges. The corresponding “no” contracts value $0.60.
Winning contracts are at all times paid out as a full greenback as soon as the end result is finalized.
Profit on every contract equals the distinction between a person’s preliminary fee (plus charges) and the complete $1 they obtain per correct prediction. So, if a person buys 10 contracts for the New York Mets to beat the Atlanta Braves at $0.40 a pop, and the Mets win, the person will earn a revenue of $0.60 per contract, amounting to $6 in general revenue out of their $10 whole return.
Users can even promote contracts mid-game as the worth modifications based mostly on chance swings. With the Mets up huge within the eighth inning, for instance, the above person might promote the unique $0.40 contracts for $0.95 apiece if they’re nervous the workforce will blow its lead late.
How is that this totally different from sportsbooks?
Prediction market platforms usually distance themselves from sportsbooks by highlighting how public sentiment drives their contract costs. Sportsbooks set odds themselves with a built-in edge, whereas Kalshi, Crypto.com and Polymarket (not yet fully launched in U.S.) tout their peer-to-peer fashions.
But there are caveats. Futures buying and selling platforms like Kalshi flip to institutional market makers to fill contracts when there isn’t somebody ready on the opposite facet to finish a deal. These are sometimes large funds like Susquehanna, which worth contracts barely above their true worth, tipping the dimensions away from retail merchants who take the offers anyway to allow them to instantly enter a market.
Kalshi’s affiliated buying and selling arm and the RFQ parlay system it pioneered further muddle the argument that it’s peer-to-peer. Other companies have applied affiliated buying and selling arms and RFQs in latest months.
With prediction market platforms additionally charging buying and selling charges on a per-contract foundation, customers nearly at all times lose cash in the long term, similar to with sportsbooks.
Are prediction markets playing?
This is the multibillion-dollar query being litigated in a number of courts, together with the U.S. Court of Appeals for the Third Circuit, the place New Jersey obtained assist in its battle in opposition to Kalshi by way of an amicus transient signed by a bunch of 34 states. Nevada, Maryland, Massachusetts, New York and Ohio are additionally now in courtroom with Kalshi. So far, Maryland has had essentially the most success, as a district choose denied Kalshi’s movement for a preliminary injunction.
Nevada managed to get Crypto.com to take its sports activities occasion contracts offline within the state after the identical choose who dominated in favor of Kalshi final 12 months to stop enforcement motion dominated in opposition to Crypto.com in the same case. While Maryland agreed to pause its pursuit of punitive motion in opposition to prediction markets whereas authorized proceedings totally play out, Nevada didn’t present the identical leeway.
Most of the monetary expertise corporations that provide prediction markets argue they’re offering entry to monetary property, not playing, and thus ought to be overseen by the federal authorities relatively than state gaming commissions. Proponents of prediction markets declare even sports activities markets have hedging utility, citing the instance of a workforce profitable a championship offering a lift to native companies round a stadium.
But most U.S. state attorneys basic, tribal teams, sportsbooks and playing dependancy organizations disagree. They level out the absurdity in saying there’s funding worth in lots of sports activities prediction market contracts, such because the 2025 Nathan’s Hot Dog Contest winner or single-game baseball wagers.
Behaviorally, critics say, individuals method prediction markets as a gambler would—and as a result of prediction market platforms are promoted as an funding device, there may be arguably the hazard of even riskier person exercise resulting from overconfidence in buying and selling.
Sporttrade’s enterprise mannequin additional undercuts arguments that the market aren’t betting, working because it has below state gaming licenses.
“You’re not going to hear me say this isn’t sports betting,” Sporttrade CEO Alex Kane told Sportico this 12 months. “That’s a ridiculous comment.”
What’s subsequent for sports activities prediction markets?
If courts decide occasion futures buying and selling is a monetary asset that falls below the purview of the Commodity Exchange Act, initially handed to set tips of futures equivalent to oil and grain costs, then the federal Commodity Futures Trading Commission (CFTC) could be the unique supply of oversight relatively than states.
The preliminary nominee to guide that company, Brian Quintenz, is a Kalshi board member who has for years argued in favor of sports activities prediction markets being below CFTC management, making the case they’ve monetary utility and fall below the Congress-approved Commodity Exchange Act. The White House nixed Quintenz’s nomination course of in September, one month after pulling the plug on his Senate committee affirmation vote.
It then put forth Mike Selig, who had been chief counsel of the SEC’s crypto process power. The Senate confirmed Selig in December. He has indicated comparable views on sports activities prediction markets as Quintenz, although he informed the Senate he would in the end defer to courtroom selections.
Conversely, if courts rule occasion futures buying and selling is playing and ought to be overseen by states, then the monetary expertise platforms would take successful from a enterprise perspective. The buyer base of the businesses would shrink from 50 states to only the states the place cell betting has been legalized (38 states and Washington, D.C.). They would additionally must observe native laws and pay native taxes, lowering potential revenue margins and their aggressive edge. They’d seemingly lose the flexibility to supply buying and selling on political outcomes, too.
A 3rd risk is that Congress will both amend the Commodity Exchange Act or move new laws that clarifies how the federal government ought to deal with sports activities occasion contracts.
At first, conventional sportsbook operators demonstrated persistence round prediction markets, saying they wished the format to achieve clearer authorized backing earlier than diving in. This has modified, with the market-leading conventional sportsbooks, FanDuel and DraftKings, every becoming a member of the fray.
When FanDuel initially introduced a partnership with CME Group to supply prediction markets, it stated it might not characteristic sports activities contracts. But it switched stances and stated in a November earnings name that it might include sports at launch in states the place sports activities betting isn’t authorized. FanDuel mum or dad Flutter already presents the sports activities prediction market platform Betfair overseas.
DraftKings, in the meantime, has acquired the CFTC-registered change Railbird.
How do prediction markets earn a living?
The major income for exchanges and brokerages is the charges they cost on every commerce. This is much less profitable on a per-wager foundation than the sportsbook mannequin. However, if it scales to the next quantity than sportsbooks, it might grow to be profitable.
Right now, Kalshi, Crypto.com and Robinhood have the benefit of reaching U.S. residents sportsbook operators can’t. Kalshi and Robinhood are dwell in all 50 states—even these the place cell sports activities betting is illegitimate exterior of tribal land—and can be found to individuals 18 years outdated and up relatively than 21 and up. Crypto.com is dwell in 49 states, having been pressured to close off its sports activities contracts in Nevada amid pending litigation.
Polymarket, common internationally, isn’t but obtainable within the U.S. It initially deliberate to launch throughout the NFL season after buying a CFTC registered change and clearinghouse. Polymarket doesn’t cost charges to worldwide clients however will achieve this for its U.S. product.
Prediction market platforms within the U.S. don’t pay the state playing taxes sportsbook operators do, as a result of they haven’t been legally outlined as playing, which is among the many causes states are trying to shut them down. Meanwhile, tribal teams with unique rights to supply playing in states like California are concerned prediction markets coming into their territories will upend their economies.
Prediction market exchanges vs. brokers
Within the business, there are two distinct enterprise fashions: Some personal the change that executes trades, and some are solely brokers that embed one other firm’s change into their platform, whereas tacking on further buying and selling charges of their very own.
Kalshi and Crypto.com each personal an change and act as brokers; Polymarket will probably be in the identical boat when it formally enters the U.S. This means they will facilitate trades inside their very own platform and let different monetary expertise corporations use their product. Kalshi’s change is embedded within the Robinhood and Webull apps, which act as a brokerages and have different business goals for prediction markets, wanting to make use of them as a gateway to different merchandise. Mansour, Kalshi’s CEO, has stated he needs to develop the variety of brokers his firm companions with.
Robinhood will change its techniques in 2026, nonetheless, as soon as it completes an acquisition of the LedgerX change and clearinghouse. The buy will give it elevated infrastructure management and cut back its reliance on Kalshi to facilitate bets.
Internationally, Polymarket makes use of an impartial cryptocurrency change known as Polygon to execute trades. It will transfer off the blockchain within the U.S.
During the ultimate week of June, Polymarket and Kalshi stated they’d accomplished new funding rounds that valued them at $1 billion and $2 billion, respectively. They have since individually raised extra funds, at valuations of a minimum of $10 billion.
Robinhood, which presents a broader suite of economic merchandise, together with inventory buying and selling, has market cap of greater than $110 billion. News of its foray into prediction markets has helped its inventory worth achieve greater than 200% in 2025.
(This article has been up to date all through with the most recent developments in prediction markets.)