BofA Expects Sports-Related Event Contracts to Hit $1.1 Trillion Per Year

Bank of America analysts believe that the annual volume of U.S. sports-related event contracts could grow to $1.1 trillion and that this activity could generate $10 billion in annualized revenue for prediction market platforms, Bloomberg reported Thursday (April 9), citing a report by the bank’s analysts.

That potential figure would be up from the $100 billion in event contract volume that is expected this year, according to the report.

Three main drivers of the growth of prediction markets are federal regulation that allows sports-related event contracts in all 50 states, accessibility to customers as young as 18 and gamblers who might be banned by sportsbooks, and an avoidance of state gaming taxes that gives prediction markets an advantage over online sportsbooks, the report said.

It was reported in February that sports-related event contracts on prediction market Kalshi were generating estimated annualized revenues of roughly $1.3 billion. The report said that figure equaled nearly a quarter of the total sportsbook revenue for betting giant DraftKings and spotlighted the increasing threat that prediction markets present to the U.S. sports gambling market.

PYMNTS reported in October that the embrace of event contracts could represent a new asset class—event outcomes traded with derivatives-grade infrastructure transparency and liquidity—or a potential regulatory arbitrage path around state gaming laws, one with thin consumer protections and opaque payout mechanics.

The momentum in the prediction market space is underpinned by forces that include a market architecture that allows for a wide range of products packaged as yes/no contracts or binary outcomes, as well as the entry of major platforms, the report said.

At the same time, prediction markets have become a flashpoint between federal and state regulators. While real-money prediction markets technically fall under the jurisdiction of the Commodity Futures Trading Commission (CFTC), a growing number of states have sought to shut down the markets they view as unlicensed or illegal gambling operations.

On April 2, the CFTC filed separate lawsuits against Arizona, Connecticut and Illinois, saying the states have taken actions that intrude on the regulator’s exclusive jurisdiction to regulate prediction markets.

The regulator is seeking a declaration that its exclusive jurisdiction preempts state laws as applied to its regulated event contracts, as well as a permanent injunction prohibiting states from using state gambling laws to interfere with CFTC-regulated event contract activity.