Prediction Markets in the USA: How Event Trading Compares to Sports Betting
If you’re into sports betting or online gambling, chances are you’ve heard about prediction markets.
Sites such as Kalshi and Polymarket have exploded in popularity. These platforms let you trade on real-world outcomes, such as elections, economic indicators, and pop culture events.
Their introduction of sports contracts has been a game-changer. You can trade on outcomes such as the winner of an upcoming game or event in major sports, or a future outcome, like the next Super Bowl champion.
Are Prediction Markets Like Gambling?
How does it all work and compare to traditional sports betting? In this complete guide, we’ll get you up to speed in no time and cover everything you need to know about prediction markets in the USA.
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What is a Prediction Market?
A prediction market is an online platform where participants can buy and sell “shares” on contracts tied to the outcome of a future event. Examples include the “Fed decision in September,” where you can predict what the Federal Reserve will do with interest rates at its next meeting.
Prediction markets aren’t a new concept. Early incarnations include the Iowa Election Markets, which debuted in 1988 and focused on political events. The Hollywood Stock Exchange was founded in 1996 and provides a venue for people to trade on movie awards and box office results.
Most recently, prediction markets have captured mainstream attention for markets tied to the US presidential election. In late 2024, sports event contracts debuted on Crypto.com, with Kalshi following suit in early 2025. Polymarket, a massive international platform, has expanded its sports offerings tremendously.
One of the key draws of prediction markets is its aggregation of opinions on what will happen. The “wisdom of the crowd” concept suggests that collective forecasting can be more accurate and reliable than the opinion of a thought leader or group of experts. Naturally, the crowd isn’t always correct, but it provides a strong sentiment indicator.
On prediction market platforms, this is reflected in the pricing of contracts. For example, a contract could be trading at 70 cents for “yes” on an outcome, and 30 cents for “no.” This is easily translated into probability, as it represents a 70% chance that the result will come to pass, and a 30% chance that it won’t.
How Do Prediction Markets Work?
Prediction markets work in a similar fashion to stock markets or a commodities exchange. Instead of trading shares of companies or other financial instruments, users are making predictions on the likelihood of a specific event outcome. Contracts are structured as a “yes/no” proposition, and you can trade on the outcomes and prices you find most appealing.
Event Contracts
- The prediction market platform creates an event contract, such as “Will Candidate X win the election?”
- Trading opens, and participants can buy and sell Yes or No shares on the event's outcome.
- The price of shares moves as people buy and sell, reflecting the latest sentiment and information.
- When the event is resolved, winning shares pay $1 each, while losing shares become worthless.
On the technical side, there are key concepts to understand: AMM and CDA.
- Automated Market Makers (AMM): They help power the buying and selling of shares, using liquidity pools and algorithmic pricing instead of a traditional order book.
- Continuous Double Action (CDA): A Trading mechanism that matches buyers and sellers, sharing similarities with peer-to-peer trading.
Leading platforms like Kalshi and Polymarket employ both, but have a key difference. Kalshi is US-regulated and registered with the Commodities Futures Trading Commission (CFTC) as a Designated Contract Market (DCM). Polymarket is decentralized, utilizing blockchain technology and smart contracts to facilitate trades.
In both places, users trade with real money, which differs from forecasting platforms such as Manifold and Metaculus, which focus mainly on accuracy. Popular prediction markets, such as sports, politics, and economics, are very liquid, with trading ramping up whenever new information develops or as popular new contracts are unveiled.
Types of Prediction Markets
Prediction markets come in several varieties, each with unique features designed to fit different kinds of traders and goals. On platforms like Kalshi and Polymarket, participants trade real money while speculating on the outcome of future events. Research-focused platforms like Manifold and Metaculus are research-focused and don’t incorporate profit-driven trading.
Due to CFTC regulation, Kalshi is widely available to US participants. Polymarket, a decentralized platform that operates on blockchain technology, is enormous in international circles and aims for future US availability. Prediction market platforms can also vary in what’s available for trading.
For example, PredictIt focuses on politics and captures much attention whenever there is a significant election. At Kalshi and Polymarket, the menu of options runs much deeper.
Common Event Contract Types
Below are the key categories you can trade on and examples of the contracts you’ll find at each.
| Event Contracts | Example |
|---|---|
| 🗳️ Politics | Who will be the Democratic nominee in 2028? |
| 🏈 Sports | College football championship winner? |
| 🎭 Culture | How many views will Taylor Swift's New Heights podcast have on YouTube? |
| 📈 Crypto | When will Bitcoin hit $125k? |
| 🌪️ Climate | When will the next Category 5 hurricane form? |
| 💰 Economics | Number of rate cuts in 2025? |
| 🗣️ Mentions | What will Trump say this month? |
| 👩🏻🏫 Companies | Best AI this month? |
| 🏦 Financials | S&P close price end of 2025? |
| 🔬 Tech & Science | Will a major meteor strike hit Earth before 2030? |
| 💊 Health | US Bird flu (H5N1) cases this year? |
| 🌍 World | Will Israel and Syria normalize relations this year? |
Prediction markets aim to aggregate collective insight to create informed probabilities regardless of the topic. Participants have the chance to trade on what they believe will happen next. Similar to sports betting, some markets are more liquid than others.
For example, NFL games and UFC pay-per-view events attract a large volume at traditional legal US sportsbooks, while more minor niche sports bring in smaller numbers. At prediction markets, typical headline grabbers include sports, politics, economics, and culture. Other areas may see less attention or ebb and flow based on what’s trending at the moment.
Types of Prediction Markets
Prediction markets come in many shapes and sizes. Each has its strengths, weaknesses, focus areas, and target audiences. Leading platforms have diverse offerings, while others have more niche appeal. Here are the major players in the space that you need to know.
- Kalshi: Federally regulated exchange in the US. You can trade on various topics, such as sporting events, political election results, and economic indicators. Participants buy and sell contracts and profit on winning trades.
- Polymarket: Built on blockchain technology, it allows global users to trade on various events, including sports, politics, and crypto prices. Cryptocurrency is used for trading. Prices update in real time as new information hits the market.
- PredictIt: Focused mainly on U.S. political events, PredictIt is popular among academics and researchers for its educational and forecasting value. While it doesn’t cover sports or entertainment, it’s considered a go-to platform in its niche.
- Other Notable Platforms: Manifold Markets and Metaculus are focused on forecasting and its accuracy without real-money trading. The Hollywood Stock Exchange lets users trade virtual shares related to entertainment, like awards and box office results.
Top Prediction Markets
Kalshi | |
Preferred Partner: Kalshi is a federally regulated event trading exchange in the USA. As the first platform approved by the Commodity Futures Trading Commission (CFTC), Kalshi offers legal, real-money trading on various real-world events. Users can buy and sell contracts on questions like “Will the Fed raise rates this month?” Each contract is priced between $0.01 and $0.99, with $1 paid for a correct prediction. Fees are transparent and based on the number of contracts and their price. | |
| Available | All 50 states |
| Minimum Age | 18+ |
| Welcome Bonus | $10 on your first trade using promo code “sharkbonus” |
| Deposits | Bank Transfers (ACH), Wire Transfers, Debit Cards, Cryptos |
| Best For | US residents seeking a legal, transparent way to trade on the outcome of sporting events, newsworthy topics, and economic indicators. |
| Strengths | + Fully regulated and legal for most US residents. |
| Weakenesses | – Various legal challenges could impact its regulatory status. |
| Read Kalshi Review | |
Polymarket | |
Polymarket is a blockchain-based, decentralized prediction market platform that lets users trade on the outcome of global events using cryptocurrency. The platform offers various markets, including politics, sports, crypto prices, pop culture, and more. Traders buy “Yes” or “No” shares with USDC (a stablecoin), with correct contracts settling at $1 and incorrect calls expiring at zero. Prices update instantly as new trades come in. Polymarket is known for its speed, transparency, and diverse topics. | |
| Available | Most international markets, and working on re-entry into the US |
| Min Age | 18+ |
| Deposits | USDC through various crypto exchanges |
| Best For | Crypto-savvy users who want to trade on a wide range of global events, including sports, value decentralization, transparency, and variety. |
| Strengths | + Global access (where permitted), with a vast selection of event markets. + Decentralized and transparent. Trades and outcomes are settled via smart contracts. + Real-time pricing and liquidity provided by automated market makers. + No centralized authority controls funds. |
| Weaknesses | – U.S. users face restrictions on real-money trading due to regulations. – Requires a crypto wallet and some familiarity with blockchain transactions. |
PredictIt | |
PredictIt is a long-running, research-focused prediction market specializing in U.S. political events. Operating under an amended regulatory no-action letter from the CFTC, users can buy and sell shares on the outcomes of elections, policy decisions, and other political developments. The platform is popular with academics, journalists, and political enthusiasts who want to gauge public sentiment and profit from their political insights. Users can invest up to $850 per question, with contracts between $0.01 and $0.99. Fees are charged on profits and withdrawals. | |
| Available | US users |
| Min Age | 18+ |
| Banking | Deposits: Credit Card, PayNearMe Withdrawals: ACH transfer, checks |
| Best For | Political followers, data enthusiasts, and traders looking to participate in legal, real-money markets focused on US politics and policy. |
| Strengths | + Focused exclusively on U.S. political and policy events. |
| Weaknesses | – Investment caps limit maximum profits per market. |
Prediction Market Platforms in Real Life
Beyond trading for fun or profit potential, prediction markets also have real-world use cases. They can help forecast election results by aggregating overall sentiment, guide businesses and investors on economic and financial data, and even assist with scientific research by pooling collective knowledge.
Prediction markets offer a wide variety of ways to engage with future events. While forecasting results for potential profit can be entertaining, there’s more to see beyond the gaming aspect. They’re also considered valuable resources for forecasting, decision-making, and tapping into the collective intelligence of a global community.
Prediction Markets vs. Stock Markets
Prediction markets share things in common with stock market trading, but there are nuances to understand. The table below gives you a side-by-side comparison of key aspects of both.
Category | Prediction Markets | Stock Markets |
|---|---|---|
Purpose | Forecast the outcome of specific events. | Investing in companies by acquiring shares. |
Structure | Trade contracts that are tied to the outcomes. | Buy and sell shares of listed equities. |
Time Horizon | Clear expiration dates tied to the contract resolution. | Can buy, hold, and sell at any time. |
Price Reflection | The implied probability of an outcome occurring. | The current market value of the company’s shares. |
In both cases, participants trade hoping to make a profit, a form of speculation. Hedging is prevalent in both spots as well. For example, stock market investors can hedge risks with futures and options.
Prediction market traders can offset positions and mitigate risk by purchasing other event contracts. When trading on either one, the listed prices of contracts and stocks essentially aggregate collective knowledge on where things currently stand.
Prediction Markets vs. Sports Betting
Prediction market trading also shares some similarities with traditional sports betting. At the former, you can buy and sell contracts on the outcome of a game or future event, while the latter offers a vast selection of wager types, including spreads and player props.
However, there are differences, including the market structure and pricing. The table below covers the key points you need to know.
Feature | Prediction Markets | Sports Betting |
|---|---|---|
Market Structure | Peer-to-peer trading, open order book, and automated market makers | Bookmaker sets odds, with bets placed against the house |
Types of Events | Wide range, including politics, finance, sports, and pop culture | Mostly sports and select events |
Pricing | Prices reflect the market consensus of the probability of an outcome occurring. | The bookmaker sets odds and may adjust them based on volume and developments. |
Flexibility | Can trade in and out of contracts before the event resolves | Usually, you must hold bets until the event ends and the wager is resolved |
Regulation | Varies – Kalshi is CFTC-regulated, others may be unregulated or restricted | Strict regulations are in place in states that have legal sports betting. |
Sports betting is generally geared toward entertainment and the potential for profits. Those aspects are present in prediction markets too, but they’re also touted for the information value provided by aggregating the collective opinions of market participants.
Advantages & Challenges of Prediction Markets
Prediction markets offer several unique benefits, but no system or trading mechanism is entirely devoid of criticism. Here are the key pros and cons of prediction markets you must know.
- Aggregation of collective intelligence, capturing insights from many participants
- Provide real-time, dynamic updates as new information emerges
- Incentivize accurate forecasting through financial rewards
- Diverse and versatile, covering a wide range of topics and industries
- Often show better accuracy than traditional polls or expert panels
- Useful tools for risk management and hedging decisions
- Potentially susceptible to manipulation by large or well-funded traders
- Face regulatory uncertainty and could be subject to potential legal restrictions
- Vulnerable to groupthink and herd behavior, reducing prediction quality
- Low liquidity in certain markets can distort prices and impact trading
- Raise ethical concerns, especially around betting on sensitive or harmful topics
- Behavioral and cognitive biases may influence participants
Legal and Regulatory Considerations
Prediction markets operate in a legal landscape that varies between countries. In the U.S., prediction markets like Kalshi are regulated federally by the CFTC as derivatives markets, allowing them to offer event contracts nationwide legally. Globally, regulatory approaches differ widely. Some countries embrace prediction markets, and others categorize them as gambling.
This differs from traditional gambling in the US. Regulation and licensing happen at the state level. There are varied restrictions by market, but many states share much in common with regulatory approaches. To date, sports betting of at least some form is available in 38 states plus Washington, DC, with online wagering permitted in 30 markets.
On the prediction market regulatory front, notable developments include ongoing legal challenges over jurisdiction and state gambling laws in some states. States, including New Jersey and Nevada, have sent Kalshi cease-and-desist letters, arguing that the platform offers unregulated sports wagering.
Ongoing litigation is in progress in states including Maryland. Meanwhile, prediction market observers patiently await further clarity and guidance from the CFTC. Add it all up, and it’s a complex and fluid situation subject to change. Kalshi’s prediction markets are currently available in all 50 US states.
Profits from prediction markets are generally treated as ordinary income for taxation purposes. Traders are advised to keep records of their accounts' ins and outs and a history of trades, both wins and losses. Due to the potential complexity, consulting with a tax professional well-versed in trading markets is highly recommended.
Are Prediction Markets Legal in the USA?
The legality of prediction markets in the U.S. depends on the platform and your location. The CFTC regulates Kalshi and operates legally under federal oversight. This federal regulation allows Kalshi to offer event contracts nationwide, distinguishing it from traditional gambling markets. It’s currently available for traders in all 50 US states.
Other platforms, like Polymarket and various blockchain-based markets, face restrictions regarding U.S. users due to a lack of clear regulatory approval. Additionally, some states may impose regulations or bans on certain types of event trading. Before signing up to trade and participating, take the time to review your state’s laws and the platform’s terms.
Why Are Prediction Markets Gaining Popularity?
Previously, prediction markets captured a ton of attention around the time of the US presidential election. Once the results were in the books, they fell into the background until the next cycle kicked into gear. Today, that’s no longer the case.
The introduction of sports has undoubtedly contributed to the massive spike in popularity for prediction markets. However, there are other reasons that those who are into forecasting have been perking up and taking notice, including:
- Market variety: Beyond sports, you can explore other markets. You can explore different interests, learn about new ones, and see what’s hot and trending by being involved with prediction markets.
- Peer-to-peer: Instead of betting against the house, which has a built-in edge and tends to do pretty well, you’re trading with other market participants, and can even get a sense of what they’re thinking by watching price moves and open interest.
- Trading flexibility: You can choose “yes” or “no” on an outcome and have the flexibility to enter and exit positions before the contract settles. This allows you to lock in profits and limit losses based on how the market evolves.
- Transparency: Pricing is clearly laid out and reflects the collective probability of an event's likelihood. There are no complex calculations to figure out the vig, as trading fees are calculated based on the price and number of contracts.
- Trending topics: If you like to be in the know, prediction markets are a great place to check out. When a topic is capturing the attention of the masses, there’s often a contract available for trading on what will happen.
- Collective knowledge: The “wisdom of the crowd” is one of the biggest draws. While probabilities and likelihood do not guarantee what will happen, prediction markets have a solid track record compared to traditional polls and pundits.
- Profit potential: You can profit via successful trades when you make the correct calls. As you gain experience trading prediction markets, you can also learn to spot mispriced opportunities and try to lock in winnings before the rest of the market catches up.
Prediction markets have soared in popularity, and the momentum shows no signs of slowing. Many expect interest to climb even higher at Kalshi this football season. This will be the first campaign where users can predict pro and college games.
Risks and Responsible Trading
Like any other form of wagering and trading, there are risks involved in participating in prediction markets. Here are some of the key factors you need to know.
- There are no guarantees with prediction market trading, regardless of the overall market perception and likelihood of an outcome. You can lose your entire stake, so only trade with funds you can afford to lose.
- Not all platforms are regulated or insured. As with any form of trading or wagering that becomes popular, you can expect to see new entrants looking to capture attention. Stick to the platforms that you can verify as legitimate.
- There are concerns that large traders can manipulate markets or that inside information can influence pricing. This risk is not exclusive to prediction markets, but something to be mindful of when you spot sudden price moves or volume jumps.
Treat prediction markets as entertainment or an enjoyable side activity for the best approach. They’re not meant to be a primary investment strategy or source of long-term income.
List of Prediction Markets
| Prediction Market | Platform Type | Founded | HQ / Jurisdiction | Currency / Token | Focus | Context | Best For | Status |
|---|---|---|---|---|---|---|---|---|
| Iowa Electronic Markets | Regulated / Academic | 1988 | US (University of Iowa) | USD (capped) | Politics, elections | University-run, capped stakes for research. | Academic research, political science | Active |
| PredictIt | Regulated / Real-Money | 2014 | New Zealand / US | USD | Politics, policy | US-only, $850 per market cap, legal issues with CFTC. | Small-stake political bettors | Active (restricted) |
| Kalshi | Regulated / Real-Money | 2021 | US (CFTC regulated) | USD | Politics, finance, sports, entertainment | First federally regulated prediction exchange. | Pro traders, hedge seekers | Active |
| Polymarket | Decentralized / Crypto | 2020 | Global (offshore) | USDC (Polygon) | Politics, culture, finance | Popular crypto market; blocked in US, active globally. | Crypto speculators, global bettors | Active (non-U.S.) |
| Augur | Decentralized / Crypto | 2018 | Global (Ethereum-based) | ETH, REP token | Any event (custom markets) | Fully decentralized; low current user activity. | Web3 developers, DeFi users | Active (low usage) |
| Manifold | Reputation / Play-Money | 2021 | US (community-run) | Play currency (Mana points) | General predictions | Gamified prediction market using play money for reputation. | Hobby forecasters, communities | Active |
| Metaculus | Reputation / Play-Money | 2015 | US (non-profit) | Play points / rep | Science, tech, policy | Strong community for long-term forecasting. | Futurists, researchers | Active |
| Good Judgment Open | Reputation / Play-Money | 2015 | US | Play points | Politics, policy, science | Open arm of the Good Judgment Project (superforecasters). | Policy analysts, forecasters | Active |
| SciCast | Reputation / Play-Money | 2014 | US (George Mason University) | Play points | Science, tech | Research-focused; later discontinued. | STEM researchers | Inactive |
| iPredict | Regulated / Real-Money | 2008 | New Zealand | NZD | Politics | Shut down in 2016 due to AML concerns. | Historical study | Inactive |
| XO Market | Reputation / Play-Money | 2013 | Unknown | Custom play currency | General | Users created their own tokens/markets; never scaled. | Experimental forecasters | Inactive |
| Azuro Protocol | Decentralized / Crypto Infra | 2022 | Global (Polygon infra) | USDT, MATIC | Sports | Protocol powering dApps like DexWin. | Web3 sports bettors | Active |
| Bookmaker / DexWin | Decentralized / Crypto | 2023 | Global | USDT | Sports | Web3 sportsbook-like dApps. | Sports bettors, DeFi gamblers | Active |
| PlotX | Decentralized / Crypto | 2020 | Global | ETH, MATIC | Crypto asset prices | Cross-chain DeFi prediction on token prices. | Crypto traders | Active |
| Better Fan / Duel Duck / Moonopol / Hedgehog / Projection Finance / SanR.app / Oriole Insights | Decentralized / Crypto dApps | 2022–2024 | Global | Various (ETH, USDT, MATIC) | Sports, finance, games | Collection of niche Web3 prediction apps. | Web3 gamers, niche users | Active (varies) |
| Hollywood Stock Exchange (HSX) | Virtual / Specialty | 1996 | US | Virtual credits (Hollywood Dollars) | Movies, Oscars | Simulated 'moviestock' market. | Movie buffs, entertainment fans | Active |
| The simExchange | Virtual / Specialty | 2006 | US | Virtual currency | Video games | Virtual market for predicting video game sales; abandoned. | Gamers, analysts | Inactive |
Tips for Responsible Event Contract Trading
Whether you’re trading prediction markets, wagering on sports, or in any other case where you’re putting funds at risk in hopes of making a profit, the principles of responsible gaming apply. Lean on the tips below to keep things entertaining as you participate responsibly.
- Have a strict budget and stick to it, never trading more than you can afford to lose. There are no guarantees, and losing your entire stake is absolutely possible.
- Stick to legal and regulated platforms with protections for your funds and data. Nothing can justify putting either at risk, as the big players offer more than enough markets to trade.
- Diversify your trades. Don’t put all your eggs in one basket. Allocate your funds across your interests while sticking to your budget.
- Avoid chasing losses. Losing trades are not fun, but it’s par for the course in prediction markets and elsewhere. Chasing those losses to recoup rarely ends well, and could be a sign that you need a refresher on responsible practices.
Prediction Market Banking Methods
Prediction market banking methods vary by platform. For example, Polymarket transactions are processed with USDC crypto, while PredictIt has limited options for moving money in and out of your account. Over at Kalshi, there’s a broader range of methods to choose from.
| Deposits | Withdrawals |
|---|---|
| Debit Cards | Debit Cards |
| Bank Transfers | Bank Transfers |
| Crypto Transfers | Crypto |
| Wire Transfers |
There are no fees for deposits and withdrawals via bank or wire. Kalshi doesn’t directly charge for crypto transactions, but there may be fees from third-party payment processors. There’s a 2% fee for debit card deposits and a $2 charge for debit card withdrawals.
Prediction Market Bonuses
For now, bonuses are an area where prediction markets are lagging compared to sports betting and other forms of legal online gaming. Platforms like Kalshi have welcome offers for new players, but don’t expect to find things bettors are accustomed to getting at sportsbooks, such as bonus bets or odds boosts.
Recap & Takeaways
Prediction markets offer something different to those who are into forecasting outcomes. You can buy and sell contracts on various events, allowing you to profit from your knowledge and expand your horizons via diverse offerings.
The introduction of sports event contracts has led to even more mainstream adoption, and that shows no signs of slowing down. Platforms like Kalshi have expanded their offerings, innovating with single-game markets and looking toward future menu expansion.
For those looking to get into prediction market trading, stick to the regulated platforms available in your area. Additionally, remember to participate responsibly and treat it as a source of information and entertainment. As with other forms of trading, there are no guarantees.
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FAQs About Prediction Markets
Are prediction markets legal in the US?
Kalshi is a CFTC-regulated prediction market that operates legally in the US, but has faced challenges from individual states that remain unresolved.
Other popular real-money and crypto-based prediction markets may be restricted or not authorized for US users. Always verify a platform’s legal status before participating.
How accurate are prediction markets?
Prediction markets often provide highly accurate forecasts by aggregating information from many participants. They have outperformed polls in some cases, especially for elections and major events.
However, it’s important to remember that likelihood is not a guarantee of what’s going to happen.
Can I make money on prediction markets?
Yes, users can profit by correctly predicting outcomes on real-money platforms. The potential for gains depends on the accuracy of predictions and market competition.
Traders should always remember to adhere to responsible gaming principles.
What’s the difference between betting and trading on prediction markets?
Betting usually means placing a fixed-odds wager with a bookmaker, while prediction market trading involves buying and selling contracts whose prices reflect event probabilities.
In both cases, there’s profit potential on correct calls, and the risk of a complete loss of stake when your forecast is incorrect.
How are winnings taxed?
Winnings from real-money prediction markets are generally treated as ordinary income and subject to taxes.
Consulting with a tax professional is highly recommended.
