This view has been echoed by anonymous early pioneers of prediction markets, who have suggested to NEXT.io that access to privileged information does not present a systemic problem.
Critics, however, contend that such dynamics risk eroding confidence in both financial markets and democratic institutions, particularly when wagers intersect with national security or foreign policy outcomes.
Citizens: Prediction markets eroding betting volumes
Beyond ethical concerns, the growth of prediction markets is increasingly being analysed for its economic impact on the broader gambling ecosystem.
Research conducted by Jordan Bender of Citizens examined approximately 1 million transactions from users who participate in prediction markets alongside other forms of wagering.
The analysis utilised cross-operator wallet data supplied by Juice Reel, a platform that aggregates real cash wagering activity across regulated sportsbooks, offshore operators, daily fantasy sports, and other betting channels.
The data reflects individual customer wallets rather than aggregate market maker or liquidity provider volume.
According to the findings, prediction markets are currently contributing to mid-single-digit cannibalisation of the legal sports betting industry.
Bender estimates that approximately 5% of regulated sports betting handle, equating to roughly $8bn on an annualised basis, has shifted into prediction market platforms.
More growth ahead
While the gross impact across all gaming categories shows an 11% decline in wallet allocation to traditional gambling within 90 days of a user’s first prediction market bet, overall wallet size increased by 9% during the same period.
This analysis seemingly indicates partial substitution rather than outright displacement.
From a corporate perspective, the effect appears uneven. Companies such as DraftKings, FanDuel and Fanatics, which have launched or integrated their own prediction market offerings, are viewed as largely insulated from adverse effects.
In contrast, operators without prediction market exposure, including theScore, Rush Street, BetMGM, Caesars, and bet365, face modestly negative implications, according to Bender.
The broader equity impact attributed to prediction markets is currently viewed as overblown relative to observed shifts in handle.
Kalshi’s recent growth illustrates both the momentum and the conundrum facing regulators. The platform’s trading volume was around $6bn in both November and December, up from less than $1bn prior to the football season.
External marketing campaigns across television, radio, and digital media coincided with 3.1 million app downloads over four months, including 1.3 million in December alone, according to Bender’s analysis.
Despite these gains and new integrations with brokerage platforms and major media outlets, month-over-month volume growth in December was limited to 3%, diverging from historical sports betting seasonality patterns.
Geographically, prediction market activity is concentrated in states such as New York, New Jersey, California, Washington, and Ohio, though larger bet sizes from frequent users skew the data.
Average wagers on prediction market platforms are substantially higher at $185, compared to $55 at regulated sportsbooks, $78 offshore, $62 through bookies, and $33 in daily fantasy sports.
These figures highlight the differences in user behaviour and risk tolerance as prediction markets continue to coalesce with established wagering industries amid increasing regulatory scrutiny.
Dingnews.com 08/01/2026