Do you think that prediction markets are hurting the big online sports books like DraftKings, FanDuel, and BetMGM? In other words, is there noticeable cannibalization going on?
Good question, the answer to which is ambiguous.
As is well known, sports "contracts," otherwise known as bets, constitute as much as 90% of prediction market volumes in the U.S. The fear of prediction markets cutting deeply into sports books' action is why DraftKings, FanDuel, and other sports betting operators, particularly those that don't have state gambling licenses to risk, have rolled out prediction markets of their own.
However, a report by Eilers & Krejcik Gaming (EKG), a well-respected research firm focused on gaming equipment, sports, and interactive gaming, finds that the prediction markets aren't, in fact, cannibalizing the sports betting industry. Instead, they're making available sports betting in states where it's not legal and available.
Of the 38 states, plus Washington, D.C. and Puerto Rico, with legalized sports betting i30 states and D.C. allow bets to be made via mobile apps or websites. And EKG estimates that nearly 70% of the prediction market sports volume is coming from the 19 states that don't permit mobile sports betting. What's more, California and Texas, neither of which allows sports betting of any kind, account for more than half (43%) of that 70%. Wow.
Thus, EKG's data shows that prediction markets are actually plugging a noticeable gap in the sports betting world.
What's more, EKG estimates that in states with legal sports betting, a maximum of a mere 2% of the handle can be attributed to Kalshi and Polymarket volumes.
And let's not forget, on prediction markets, the minimum age to participate is 18, as opposed to 21 in almost all states (Kentucky, Montana, New Hampshire, Rhode Island, and Wyoming, and Washington D.C., along with some tribal casinos, are the exceptions). So it seems to us that EKG's ostensible 2% cannibalization rate probably has a lot to do with 18- to 20-year-olds making bets that they wouldn't otherwise be able to.
Some analyses (from NEXT.io and Bank of America, among others) peg cannibalization at 5%-10% of legal online sports betting, a little higher but not catastrophic.
And DraftKings and FanDuel definitely dominate where the real money is in sports betting, parlays, with Kalshi and Polymarket slowly playing catch up.
Where the big differences show up is in the stock valuations. DraftKings and Flutter Entertainment (FanDuel’s parent) have both seen sharp declines since mid-2025, with DK upwards of 50% off peaks, while Flutter lost around $30 billion in market cap, partly blamed on prediction market competition. Both have launched their own prediction market products/apps in response.
So to finally answer the question, we say prediction markets aren't an existential threat, at least not yet; sportsbooks remain far larger in absolute revenue/handle. But Kalshi and Polymarket are nibbling meaningfully at the edges — enough to affect growth trajectories, stock valuations, and user acquisition. This dynamic is evolving fast and furious, including restraining orders, cease-and-desists, and lawsuits galore, so we'll surely be revisiting the question in the near future.
