For decades the dominant business model in sports betting has been through bookmakers. The sportsbooks provide the odds, take a small fee for their service, and bettors try to beat them to the best and most valuable winning picks. However, a new force is emerging the in the world of gambling – one that doesn’t even like to call itself gambling at all. This what you need to know about prediction markets and how they might change sports betting forever. 

Platforms like Kalshi and Polymarket create a financial style stock market out of questions in sports and other events. Users put money down on various options, usually in a yes or no format, and a graph line starts showing the average price of each option.

As more bettors pile on either side, the options prices grow and fall reflecting their popularity. Once the question is settled, bettors on the winning line are paid out. People now put down millions of dollars on these platforms every day. How did they get so popular?

The Established Model of Sports Betting is Still Growing

Sports betting has been booming for the past decade or so, in the US and across the globe. With all these new bettors interested in the game, operators have been trying to think up new innovations to bring to customers in a crowded and competitive market.. That is especially true now that prediction markets are challenging them for new customers.

One innovation some sportsbooks have come up with is the betting voucher. These cards, available at physical shops in many markets, can be purchased with cash. Customers then input the code on the voucher in their online sportsbook and are granted a deposit of the equivalent cash value into their online accounts. This is an easy way for people who prefer cash transactions to get into online betting. Easy.

Other ways online sportsbooks have thought of to appeal to new customers include:

• Daily prize wheels offering free bets and boosts
• Bigger and better welcome bonuses and promotions
• Data analytics led custom offers and bonuses tailored to your betting style

Clearly, these things are still working. The global sports betting market is expected to reach $169 billion in value by 2029 according to market research. But there is competion in the water. Prediction markets have several advantages over the traditional sports betting model

Peer to Peer Prediction Markets Are Changing the Game

Prediction markets first saw a rise popularity in the mid 2010s, before falling off slightly. In the 2020s, they’re back again and stronger than ever.

Bettors, or “traders” as prediction markets like to call them, at a single operator – Polymarket – put down more than $1 billion in May 2025. That’s up an astonishing 15 times on the previous May. If that growth continues, prediction markets will have the sportsbooks beat in just a couple of years. Which is not to say it isn’t possible. Maybe someone should start a prediction market for it…

Some of the key factors behind the massive growth of these markets over the past five years include:

• Not being exactly definable as betting makes them almost universally legal across the world unless specifically challenged by regulators
• Some people are interested in using them as accurate forecasting, because the markets have predicted many global events missed by traditional data analysts
• Being able to put money down on predicting events not covered by sportsbooks. Such as international politics, elections, celebrity scandals and basically anything people can think of that has enough interest

Prediction markets also benefit from growing popularity of financial trading among individuals. Customers find them familiar, as they resemble market trading and add timely buying and selling of bets into the sports betting equation.

Hurdles Ahead for Prediction Markets

However, it isn’t all on the up for prediction markets. Some of the major players have seen legal challenges in the US and in France. Specifically after one trader on the platform made millions on the 2024 US election market backing Donald Trump.

The platforms have also failed to attract large scale investment from traditional financial firms. Some analysts suggest that the trading algorithms used by prediction markets aren’t as good as the ones top financial traders are used to, and they can make more money their way anyway.

While the platforms are rising in popularity and revenue this might not be a problem, but it is highly possible more traditional investment may be needed to keep the market sustainable in the future.

The controversial nature of user generated betting markets may also be a stumbling block in some countries. Comedic markets based on memes or potential film review scores are all well and good, until you realise some people are losing money on what is basically an impossible to win bet.

That isn’t true in sports betting. The continued growth of both markets seems the more likely scenario. The hype around prediction markets should cool off and global regulators will be looking more closely at controversial markets – or indeed whether they do actually fall under sports betting. Regardless, prediction markets have already changed up the game in a way not seen since online sportsbooks first became a thing. And that looks likely to continue.