This year, the main competition in sports gambling isn’t between teams, but between two different business models.
While Americans get ready to bet over $1.5 billion on the Super Bowl, a new type of platform is making sports betting more widely available. Companies like Kalshi and Polymarket are taking on big names like FanDuel and DraftKings by providing a legal option in states where regular sports betting is still not allowed.
For almost ten years, FanDuel and DraftKings have led the online sports betting industry, holding about 80%of the market. Their rise began after a 2018 Supreme Court decision let states legalize sports betting. Since then, the industry has grown into a $150 billion business each year.
However, sports betting is still banned in several large states, including California and Texas, and that is where prediction markets come in.
Prediction markets are overseen by the Commodity Futures Trading Commission, not by state gambling regulators. Instead of placing bets with a sportsbook, people buy and sell contracts about whether something will happen. In sports, this could mean trading contracts on which team will win. This setup lets these companies offer something similar to sports betting across the country, even in places where sportsbooks are not allowed.
This difference has raised concerns among regulators, sports leagues and the gambling industry itself.
Traditional sportsbooks must comply with state licensing rules, share betting data with regulators and leagues, and adhere to consumer protections, such as minimum age requirements and safeguards against gambling addiction. Prediction markets operate under a different framework, and critics argue that those protections are weaker.
State regulators in several places have taken Kalshi to court, claiming that prediction markets are really just unlicensed sports betting. Industry groups are also worried about integrity risks, saying that less oversight could make it harder to spot suspicious betting linked to match-fixing or insider information.
Sports leagues have also taken notice. The NFL and NCAA have publicly expressed concerns that prediction markets could threaten the integrity of games, especially in states where sports betting is still illegal. The NCAA has even asked federal regulators to pause college sports contracts on these platforms until better protections are put in place.
Meanwhile, established sportsbooks are making changes. FanDuel and DraftKings are testing prediction-market-style products, indicating they see this model as both a threat and an opportunity. Expanding into prediction markets could help them find customers in states where their main business is still banned, but it also complicates matters with state regulators.
A product that began as a niche financial tool is now at the heart of a big battle over the future of sports gambling. The result could change who leads one of the fastest-growing areas in digital entertainment.
Whether prediction markets are an innovation or just a loophole may ultimately be decided in court. Until then, the business competition off the field could be as fierce as the games themselves.
