Prediction markets trail sports betting growth despite $82bn September volume

Prediction markets generated more than $82 billion in trading volume in September, with $76.7 billion coming from federally regulated prediction markets, up 64% from August, according to research from Stifel.

However, using a measure more closely resembling sportsbook handle, Stifel estimated prediction market trading grew 27% month-over-month, compared with a 43% month-over-month increase in regulated sports betting handle in states that have reported results so far, the research firm said.

Sports contracts drive prediction market activity

Single-event sports contracts generated $22.8 billion in September, up 23% from August, while combination contracts or parlays more than doubled to $41.6 billion, Stifel said. Together, sports and parlays accounted for 83% of Kalshi’s trading volume.

Stifel estimated taker-only volume across CFTC-regulated exchanges at $17.7 billion, based on trading patterns at Kalshi and Polymarket US.

Kalshi’s share of regulated prediction-market volume fell to 79% from 86% in August as competitors gained ground, according to the research.

Traditional sports betting shows mixed results

U.S. sports betting handle increased an estimated 4% year over year in September across 13 reporting states, despite one fewer week of NFL games than last year, Stifel said. Gross gaming revenue fell 9% in September as game results largely favored bettors.

FanDuel continued gaining sportsbook handle share, while DraftKings showed improving online casino market share, Stifel said.

Market developments

Several exchanges, including Kalshi and DraftKings’ DKeX, have recently scaled back trading incentives as market liquidity improves, according to Stifel. Fanatics has indicated it could nearly triple marketing spending next year.

The Wall Street Journal reported Saturday that $108 million out of $167 million in transactions on FIFA’s World Cup prediction market partner ADI Predictstreet came from interconnected cryptocurrency accounts apparently linked to the platform.