The increase in popularity of prediction markets leading up to the Super Bowl weekend has caused concern for traditional sportsbooks, prompting investors to reduce their exposure and causing shares of Flutter Entertainment (owner of FanDuel) and competitor DraftKings to decline significantly so far this year.
Today’s game between Seattle and New England at Levi’s Stadium in Santa Clara is expected to generate record trading volumes on prediction markets, according to Jordan Bender, a senior equity analyst at Citizens.
Bender stated, “A significant reason we anticipate a decrease in Super Bowl handle is due to the impact of prediction markets.” Since the 2024 presidential election cycle, platforms like Kalshi and Polymarket have seen an increase in trading volumes that would typically go to sportsbook apps.
Professional sports bettor Rufus Peabody told Bloomberg, “It seems like everything revolves around prediction markets nowadays.” Peabody, who started trading on Kalshi in September, mentioned, “Maybe not for casual bettors, but definitely within the professional community.”
Federally regulated exchanges like Kalshi have made prediction markets accessible to millions of Americans in states where sports betting is not legal, leading to legal battles with gaming regulators at both federal and local levels.
These markets offer bets on a variety of events, including sports, elections, and geopolitics, with sports betting experiencing the fastest growth. In January, Kalshi saw nearly $10 billion in contracts traded, primarily related to sports betting.
Traders on Kalshi and Polymarket have exchanged $800 million in contracts tied to the Super Bowl, in comparison to the $1.8 billion that Americans are expected to bet through traditional sportsbooks.
Despite the rise of prediction markets, some Wall Street analysts predict that US sportsbook companies will still see significant profits from the Super Bowl weekend.
Ed Birkin, a senior analyst at H2 Gambling Capital, forecasted a 9% increase in total wagers this year to $1.78 billion, with prediction markets expected to attract $630 million in bets for the Super Bowl, marking an 80% year-over-year growth in wagering activity for the event.
Overall, the integration of prediction markets continues to shape the landscape of sports betting, providing new opportunities for both bettors and investors alike.