Prediction Markets Chip Away at Sports Betting’s Territory

Sports-related bets on Kalshi are now generating estimated annualized revenues of roughly $1.3 billion.

As the Financial Times (FT) reported Saturday (Feb. 14), that figure is nearly a quarter of the total sportsbook revenue for betting giant DraftKings and spotlights the increasing threat that prediction markets like Kalshi present to the $14 billion U.S. sports gambling market.

The report came one day after DraftKings shares fell after the company said it expected 2026 revenues would be $6.5 billion to $6.9 billion, short of analysts’ $7.2 billion projections. Flutter, which owns rival FanDuel, saw its stock fall as well, with both companies losing more than half their market value in the past year.

FT said its analysis of Kalshi data found that trade volume and fees ballooned last fall with the start of football season in the U.S. As of this month, the platform’s annualized revenues for sports trading accounted for roughly 90% of its fees.

Monthly activity users on Kalshi’s app have jumped from 600,000 at the start of last year to 5.1 million as of Feb. 9, the report added, citing data from Sensor Tower.

Still, sportsbook companies have dismissed the idea that they face a threat, FT added. DraftKings CEO Jason Robins said that, in markets where sports betting was legal, those moving to prediction markets were mostly “low-margin or even negative-margin customers.”

For most retail bettors, Robins said sportsbooks provided a more fully fledged product with “better promotions,” while prediction markets were a “great substitute” for people living in states that outlaw sports gambling.

In exploring DraftKongs latest earnings last week, PYMNTS wrote that the company “is betting, quite literally, that it can lead that transition by redefining not just how people bet on sports, but how they engage with uncertainty itself.”

To that end, the company is touting Predictions, which lets users trade event-based contracts, and which DraftKings sees as potentially representing a $10 billion annual gross revenue opportunity over time.

“But even as DraftKings approaches profitability, elements of its revenue base remain inherently variable,” the report added. “Sports outcomes can materially affect quarterly results, with the company estimating that a one-standard-deviation swing could move revenue by roughly $150 million in either direction.”

PYMNTS reported in December on the influx of U.S.-accessible prediction market platforms now that these companies are regulated at the federal level by the CFTC, rather than at the state level by gambling commissions. However, regulators in more than a dozen states are challenging the legality of prediction markets, with varying degrees of  success.