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Prediction markets are not a new phenomenon, but they have become a hot topic in sport.
Early entrants into the sector are now valued at billions of dollars and have struck partnerships with leagues and teams eager to unlock new forms of fan engagement. For participants, the appeal lies in the potential to profit by using their knowledge to predict future events.
However, there is still an element of the unknown. As gambling companies move into the space, regulatory scrutiny is intensifying and legal challenges are mounting.
Here, SportsPro tackles the key questions around prediction markets, from how they work and their potential as a sponsorship category, to the risks and opportunities they present for the sports industry.
What are prediction markets?
Prediction markets have existed for decades, allowing people to trade contracts or shares, the value of which fluctuates based on the outcomes of live events and other major occurrences.
A prediction market is created around a specific event or question. For sport, this could be things like who’ll win the 2026 Fifa World Cup or whether Luka Dončić will win the National Basketball Association’s (NBA) Most Valuable Player (MVP) award. Participants can also sell contracts during a match as the value changes.
Users buy and sell shares or contracts linked to various outcomes. For the World Cup example, there may be contracts for each team. If someone believes Brazil will win, they can buy shares for that outcome.
The price of these shares reflects the perceived probability of the outcome occurring. If shares for Brazil winning the World Cup are trading at US$0.60, the market believes there’s a 60 per cent chance of Brazil winning. If the price moves to US$0.80, it indicates a higher probability.
The closer the price is to US$1, the higher the expected probability of the event happening. However, the potential profit for buyers decreases as the price approaches US$1.
Once the event concludes, participants who predicted the correct outcome are paid based on the number of shares they hold in the winning outcome. So, if someone buys ten contracts for Brazil to beat England at US$0.30 each and Brazil win, they earn US$0.70 profit per share, totalling US$7 in profit from a US$10 return.
Prediction market platforms can generate revenue through transaction fees on trades, market creation fees for users who set up events, and the spread between buying and selling prices.
The NHL became the first major US professional sports league to partner with Kalshi and Polymarket (Image credit: Getty Images)
Why have they become so popular?
Prediction markets have been a relatively niche concept but gained significant traction in the US in 2024 when contracts were introduced that allowed people to effectively bet on elections – a practice historically restricted. It meant millions of people used contracts to wager on whether Donald Trump or Kamala Harris would win the US presidential election.
Sport is now the leading sector in the US for prediction markets, which are available in all 50 states. Crypto.com became the first company to offer sports contracts nationwide in December 2024, with Kalshi following suit in January 2025.
As more companies and industries got involved, explosive growth followed. It is estimated that the sector expanded 130-fold between 2024 and 2025, with monthly volumes rising from US$100 million per month to more than US$13 billion by the end of last year.
The rise of prediction markets indicates a demand for interactive, market-driven fan experiences that combine live data with financial incentives – an offering traditional sports media cannot always provide.
Prediction markets are also seen as an alternative to traditional sports betting, where wagers are placed against a bookmaker with fixed odds. In contrast, the collective behaviour of prediction market users sets the odds in real-time, in theory creating a more transparent and market-driven process that appeals to those who see themselves as traders rather than bettors.
“Like many emerging categories, you’re seeing a lot of growth and a lot of adoption and popularity with different types of consumers,” Drew Northfield, vice president of corporate partnerships at the Excel Sports Management agency, tells SportsPro.
“That’s ultimately driving a lot of growth and attention on the category and space.”
What are the commercial opportunities for sport?
More leagues and teams have been partnering with prediction market platforms over the last few months. In November, TKO Group’s Ultimate Fighting Championship (UFC) and Zuffa Boxing inked a multi-year deal with Polymarket, which will see the integration of prediction markets into events.
Since then, Major League Soccer’s (MLS) tie-up with Polymarket, signed in January, will see it become the first soccer competition to integrate prediction market insights into its fan engagement efforts. The New York Rangers and the United Pickleball Association (UPA) also have pacts with Polymarket.
Kalshi now has partnerships with the likes of the National Hockey League (NHL), the Chicago Blackhawks, the Pro Padel League (PPL) and the Pro Pickleball Association (PPA). Kalshi also made golf star Bryson DeChambeau the first athlete to sign with a prediction market platform. In February, basketball ace Giannis Antetokounmpo become a shareholder in the company – he won’t be permitted to trade on markets related to the NBA.
Not all sports organisations are embracing these partnerships. Notably, the National Football League (NFL) and the PGA Tour plan to keep blocking players from endorsing prediction market platforms. The former also prohibited commercials about prediction markets during this year’s Super Bowl. Kalshi ended up suffering from technical issues as trading volume surged on the day of the game, surpassing US$1 billion.
Meanwhile, National Collegiate Athletic Association (NCAA) president Charlie Baker has weighed in, urging last month that the Commodity Futures Trading Commission (CFTC), the federal regulatory body that presides over prediction markets in the US, to pause all college sport offerings in prediction markets until the agency implements appropriate regulations.
Sports properties have never been shy about carving out additional sponsorship opportunities. But the current landscape of prediction markets (more on that shortly) remains a cautious area for some.
“Every league is going to take their time, like with any emerging category, to determine what their stance is going to be,” says Northfield. “They’re going to work with regulators and the governing bodies that want to ensure that there’s no match fixing or any sort of insider trading that can take place.
“But this category offers a very unique opportunity for leagues to engage fans in different ways, so they are undoubtedly going to want to try to work with them in some fashion, especially if it also means taking a percentage of handle.”
Giannis Antetokounmpo’s deal with Kalshi drew backlash from fans who believed it created a potential conflict of interest (Image credit: Getty Images)
How have gambling companies responded?
Gambling companies have seen the valuations of early movers in the prediction market space skyrocket. Polymarket and Kalshi both raised hundreds of millions of dollars last year, reaching valuations of over US$1 billion and US$2 billion respectively. Together, they generated a combined volume of more than US$37 billion in predictions placed in 2025.
The growing popularity of prediction markets poses a competitive threat to traditional gambling firms, which must comply with state gambling laws and can’t operate in states where sports betting is illegal – 11 US states, to be exact.
In response, major sportsbooks in the US, including FanDuel, DraftKings and Fanatics, have all recently launched their own prediction markets at considerable cost. FanDuel owner Flutter expects to invest as much as US$350 million as it rolls out its prediction markets app, according to Bloomberg.
Multiple US states, including Nevada, have warned gambling operators they are in danger of losing their licenses if they take prediction market bets.
The big question is whether prediction markets should be considered gambling. Many platforms in the space market themselves as investment tools, claiming they offer access to financial assets rather than betting. However, critics argue that many prediction market contracts lack true investment value and could encourage even riskier user behaviour, especially since many people may not fully understand the risks involved, as they perhaps would with traditional gambling.
FanDuel is among the US gambling companies to roll out a prediction markets offering (Image credit: Getty Images)
What happens next?
Prediction market platforms in the US are facing increasing legal and regulatory pressure. Kalshi, for instance, is currently dealing with multiple lawsuits, one of which accuses the company of running an unlicensed sports gambling platform that misleads customers into believing they’re receiving fairer odds than traditional sportsbooks, when that isn’t the case.
Polymarket, meanwhile, is in the process of resuming its operations in the US after a 2022 enforcement action by the CFTC, which required the company to wind down its services for failing to register as a Designated Contract Market (DCM). Polymarket secured federal approval to operate legally in the US at the end of last year following its acquisition of QCX, a CFTC-licensed exchange and clearinghouse.
More financial firms are also expected to integrate event contracts into their platforms, after the likes of Robinhood and Webull did so with Kalshi.
In the UK, peer-to-peer betting exchange Matchbook is preparing to introduce what it describes as the country’s first dedicated prediction market. That product is expected to be regulated as gambling rather than the financial-derivatives model seen in the US. Robinhood is also reportedly in talks with the Financial Conduct Authority (FCA) about launching a prediction market in the UK.
Significantly, the CFTC is still embroiled in jurisdictional disputes with state regulators. Federal courts in Nevada and New Jersey have affirmed that the CFTC has jurisdiction over DCM event contracts, but other states, such as Maryland, are trying to halt sports-related contracts.
Prediction market platforms in the US argue that they should be overseen by the federal government rather than state gambling commissions, which could limit their operations and impose betting taxes.
“I think it’s a space that is here to stay,” says Northfield. “The most telling sign has been the sportsbook operators and their decision to enter the space.
“This space presents a unique opportunity for [sports] properties and [sportsbook] operators to engage different types of fans. For example, women have long been a target audience for the sportsbooks.
“With these prediction markets offering a broad range of things that you can predict of markets that cross over into entertainment and politics and culture, you’re going to have the ability to engage a much broader audience.”
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