The rapid growth of prediction markets over the past year has raised concerns among investors in the sports betting sector. However, new research indicates that these markets are not significantly disrupting traditional sportsbook operators. According to a report from Citizens Equity Research, only about 5% of legal sports betting volume in the United States has transitioned to event-trading platforms, amounting to approximately $8 billion annually.
While this figure is noteworthy, analysts do not view it as sufficient to alter the prospects for major sportsbook operators. The report suggests that while there is a genuine shift in betting activity, it is both real and limited. Data from over a million linked user transactions collected by the Juice Reel aggregator indicates that bettors do move some funds after trying event-trading platforms, but their overall betting expenditure increases. Users reportedly reduce their regular gambling budgets by about 11% after participating in prediction markets, yet their total activity across all betting forms rises by around 9%.
Market Dynamics and Investor Sentiment
Jordan Bender, a leading analyst at Citizens, believes that investor pessimism may be overstated. He noted that the decline in stock prices observed in 2025 was much more pronounced than the actual effect of market share loss. For prominent companies such as DraftKings, FanDuel, and Fanatics, the impact of this shift is minimal. These firms operate their own prediction platforms, allowing them to recapture users who may explore alternatives. The fact that they control over 75% of legal betting in the U.S. provides an additional layer of security against market fluctuations.
In contrast, analysts express concern for brick-and-mortar operators. Companies with a significant presence in physical locations—like Caesars, MGM’s BetMGM, Penn Entertainment, and Rush Street—face greater challenges in retaining customers who might migrate to online markets. Experts speculate that these firms have been hesitant to develop their own event-betting products, fearing that online offerings could cannibalize their physical casino revenues.
Growth Trends and User Experience
A considerable portion of the recent surge in event trading can be attributed to Kalshi, which reported that its monthly event-contract volume exceeded $6 billion in November and December 2023. This increase is largely driven by demand for football-related events and aggressive marketing strategies. Despite this uptick, analysts note that month-to-month growth appears to be stabilizing.
Another significant concern is the financial well-being of users engaging with prediction markets. The research indicates that newcomers often incur losses more rapidly on these platforms compared to traditional sports betting applications. The average trade on prediction markets exceeds $180, which is more than three times the amount typically wagered on sportsbooks. At the same time, experienced traders tend to achieve better outcomes than casual participants, leading to a higher attrition rate among less successful users.
Overall, while the prediction market segment is expanding swiftly, its current financial impact on sportsbooks remains limited. Bender likens this situation to the industry’s revenue decline stemming from an unprofitable Monday night football game. As the landscape evolves, both traditional and emerging players will need to adapt to maintain their market positions effectively.