A gaming research firm says prediction markets could become a $1 trillion industry nationwide when they fully mature, with $435 billion of that coming from sports betting contracts.
The battle between prediction markets and states that offer legal sports betting may not be resolved for months, even years.
Newport Beach, Calif.-based Eilers & Krejcik published a December report, “US Prediction Markets: How Big, How Fast, What’s Next?” which estimates how much the federally regulated markets could cut into traditionally state-regulated sports betting and that it may not be until 2027 that legal disputes wind their way through court appeals that could ultimately end up at the level of the US Supreme Court.
“Prediction markets could become a major catalyst for reshaping both the betting and trading industries, and could increasingly blur the line between the two,” the firm said in the summary of its 32-page report. “But countless spots of risk, unknown and uncertainty are scattered across the road from here to there.”
Prediction markets entered the Nevada landscape in early 2025 when state regulators found New York-based KalshiEx LLC selling prediction contracts from its website on the outcome of sporting events.
Nevada’s attorney general’s office believed that Kalshi’s contracts, which offer yes-or-no propositions on all kinds of issues from weather forecasts to economics to pop culture issues, engaged in a form of sports betting with its sports performance contracts.
March trial
In late March, Kalshi filed a lawsuit against individual members of the Nevada Gaming Control Board and the Nevada Gaming Commission. Because Kalshi’s actions directly affected resorts with sports books, the Nevada Resort Association signed on as a defendant in the case.
In November, U.S. District Judge Andrew Gordon lifted a preliminary injunction that had allowed Kalshi to offer contracts at sporting events until the case was decided in court.
While Kalshi competitors Robinhood and crypto.com agreed to stop signing contracts in Nevada, Kalshi refused and continues to operate in the state as the company appeals Gordon’s decision to the Ninth Circuit Court.
The Eilers & Krejcik report speculates on what will happen next and other legal experts have weighed in on the future of prediction markets.
Alan Wilmot, a partner at Heitner Legal PLLC, an intellectual property, sports and entertainment law firm based in Fort Lauderdale, Fla., believes the number of stores will expand by 2026.
Writing for Las Vegas-based Legal Sports Report, Wilmot said more outlets are coming.
“Last year saw 12 organizations file and/or otherwise be designated as a DCM (designated contract market), a 500 percent increase over 2024; this number does not include those seeking to become future commission traders to offer prediction markets in partnership with DCMs,” he wrote.
Wilmot explained that some sportsbooks and fantasy sports operators are considering developing prediction markets as part of their business models.
That’s unlikely to happen in Nevada, where Gaming Control Board Chairman Mike Dreitzer issued an industry notice to gaming licensees warning that predictive market contracts are a form of betting.
“Offerings of sports and other event contracts may be conducted in Nevada only if the offering entity holds an unrestricted gaming license with sports pool approval in Nevada and meets the other requirements for sports betting including, without limitation, gaming accounts and sports book systems,” Dreitzer said in the Oct. 15 memorandum.
Now offering parlays
The Eilers & Krejcik report indicated that not only are prediction markets growing in number, they are adding new contract products similar to sports betting.
A parlay bet is a simple bet where two or more individual bets are combined into one. For a parlay game to win, each bet selection must be correct. The appeal of a parlay is that it pays out more for winning tickets. The payouts are higher as the odds from each part of a bet are multiplied together making for a riskier proposition as each part of the bet must be correct.
The Eilers & Krejcik report notes that more than half of the gross gaming revenue generated by sportsbooks comes from parlay games.
The report said that “any prediction market product that hopes to compete meaningfully in sports must, in some form, replicate the emotional payoff and upside that parlays provide.”
That’s why Kalshi introduced same-game parlay contracts in September to offer a competitive product to sportsbooks.
Analysts now speculate that prediction markets will introduce parlays that cross over to other topics, giving them something traditional sportsbooks don’t offer.
Eilers & Krejcik, in its $1 trillion trade forecast, said sports prediction events would generate $435 billion, with a $310 billion market for financial and crypto predictions, $160 billion in news, $40 billion in culture and $55 billion in other topics.
Questions remain
While the report offers several insights and predictions, it also notes that there are many unanswered questions. Among them:
-How much of the total addressable prediction market can non-sporting events generate? “Clearly, there is no good case for prediction markets without a significant total addressable market contribution from non-sports markets. We could easily fill an entirely separate report trying to answer that question, and we may at some point. But for now, we’ll settle for a simpler conclusion: We see a path to non-sports events generating an equal or greater share of the total trading volume for sports.
– Will the prediction markets offer truly new products? Will we see cross-genre parlays?
-Will increased distribution and reduced friction generate meaningful incremental consumer use? “This is another issue where we’re more bullish than bearish, but it’s important to acknowledge that we still don’t know for sure. The ‘mainstream’ prediction market category is effectively a year old in the US, and we’re only now starting to see a real push from a range of brands. Until we have better data, the breadth of consumer demand and consumer demand remain unknown.”
-Will a regulated online sportsbook operator turn to prediction markets? “A highly speculative but not unlikely path driven by several factors: lines in the sand drawn by gambling regulators, unsustainable state gambling tax rates, an effectively locked-in iCasino total addressable market, and a product set for the prediction market that is increasingly gamblified amid a permissive Commodity Futures Trading Commission under (President Donald carrots state) is Trump’s club. access, substantially lower revenue costs and the potential to bringing differentiated products to a predictable market sector largely devoid of betting and casino heritage.
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