The rapid growth of prediction markets has raised concerns among investors in the sports betting industry. However, recent research suggests that these emerging platforms do not pose as significant a threat to traditional sportsbook operators as some may believe. According to a report from Citizens Equity Research, approximately 5% of the legal sports betting volume in the United States, equating to around $8 billion annually, has shifted to event-trading platforms. Despite this noticeable change, analysts maintain that it is insufficient to alter the landscape for major operators.
The report indicates that while there is a measurable shift in betting behavior, it remains contained. Data gathered from over a million linked user transactions by the Juice Reel aggregator reveals that although bettors do transfer some funds to prediction markets, their overall spending tends to increase. After joining these platforms, users typically reduce their conventional gambling budgets by about 11%, yet their total activity across all betting types grows by approximately 9%. This trend suggests that prediction markets are enhancing overall engagement rather than merely siphoning customers from established sportsbooks.
Major Operators Remain Resilient
Jordan Bender, a leading analyst at Citizens Equity Research, expressed that investor concerns have been overstated. He highlighted that the drop in stock prices for sportsbooks in 2025 has far exceeded the actual impact of market share loss. For large companies such as DraftKings, FanDuel, and Fanatics, this shift presents minimal financial risk, particularly as these firms have begun to develop their own prediction platforms. With these companies controlling over 75% of the legal betting market in the U.S., their position provides a buffer against potential losses.
In contrast, businesses that lack similar online offerings face more significant challenges. Traditional operators with numerous physical locations, including Caesars, MGM’s BetMGM, Penn Entertainment, and Rush Street, may experience a more pronounced loss of customers to online markets. Many of these companies have yet to launch their own prediction products, likely due to concerns that these platforms could adversely affect their profits from brick-and-mortar casinos.
Growth of Prediction Markets and User Concerns
A substantial portion of the recent growth in prediction markets can be attributed to Kalshi, which saw its monthly event-contract volume surpass $6 billion in November and December 2023. This surge was driven by increased demand during the football season and aggressive marketing strategies. Nevertheless, the rate of growth has begun to stabilize in recent months.
Another emerging concern pertains to the financial well-being of users engaged in prediction markets. The study indicates that new users tend to lose money at a faster rate on these platforms compared to traditional sports betting applications. This is largely due to the average trade value exceeding $180, more than three times the average bet placed on sportsbooks. While more experienced traders appear to perform better, casual users often leave the platforms after experiencing losses.
Overall, experts conclude that although prediction markets are growing rapidly, their current impact on sportsbook finances is limited. Bender likened this situation to the industry’s revenue decline stemming from an unprofitable Monday night football game, underscoring that the potential disruption from prediction markets should not be overstated.
