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Bank of America Corp. estimated that sports event contracts offered by U.S. prediction markets could fetch $1.1 trillion in annual trades, according to Bloomberg.
Key Takeaways
- The report estimated $100 billion in contract trades in 2026.
- Seventy-nine percent of Kalshi’s trades in March were in sports markets, per the report.
- Kalshi lost a key court battle in Nevada this week, preventing it from offering contracts to local customers.
A report released Wednesday outlined the estimated 13-figure annual market for sports event contracts, which assign binary “Yes” and “No” outcomes to events across the world of sports.
Bank of America’s valuation is a reflection of the total expected market size, which was based on an evaluation of the existing U.S. sports betting market.
Sportsbooks install vigs into their odds, distorting their true probability and giving the house a greater margin for error than what exists for customers. Prediction platforms differ by incorporating transaction fees and other small charges to turn their profits. Even if these platforms only yield 1% of every dollar, that would result in them claiming more than $10 billion in profit in one year off fees alone, based on the estimate.
Analysts say the success of prediction market sites stems from three key factors: federal regulatory backing, strong appeal to younger users, and the absence of gaming taxes on bettor profits.
While 39 states and Washington D.C. have legalized the pastime, the two most populous states, California and Texas, have not.
Bank of America expects about 9% of its $1.1 trillion figure to be realized this year, with approximately $100 billion in verified trades before the ball drops.
Kalshi stealing the show
More companies are entering the world of predictions, but none come close to reaching the Kalshi‘s heights. The report found that America’s prediction leader accounted for 90% of all trading activity, while its top U.S.-based competitor, Crypto.com, only held a 4% market share. Analysts mostly omitted the top offshore competitor, Polymarket.
Seventy-nine percent of Kalshi’s trades in March were related to sports, according to the report. That’s significant since the platform does not need state-level approval to offer sports contracts in states without legal sportsbooks despite the similarities of the products.
Many states also require sportsbooks to secure market-access partnerships before they can launch in a new jurisdiction. These deals ensure that local casinos, sports venues, horse racing tracks, bars and restaurants, and other verified locations are entitled to a share of the companies’ profits. Kalshi avoids these payments by not being required to negotiate with market-access partners.
Additionally, Kalshi users only need to be 18 to access the platform. Nearly every state requires customers to be at least 21 to participate in any form of gambling.
“Kalshi is becoming rapidly integrated into daily life with always on odds for markets across finance, crypto, pop culture, and sports,” Bank of America analysts Julie Hoover and Shaun Kelley noted, per Bloomberg.
Increasing tensions
Officials behind popular prediction platforms have touted their markets’ accuracy, open competition, and clear operational distinction from sportsbooks as reasons why sports contracts should be allowed to continue operating en masse. Bank of America’s analysts also highlighted the attractiveness of prediction platforms to sports bettors who are punished for winning their bets.
“Sharp bettors are typically banned or limited on regulated sportsbooks for beating the house too frequently,” the analysts wrote. “For these bettors, who often wager/trade much more than a casual customer, a prediction market could be much more attractive since they don’t get limited and can play the sportsbook house and market make against casual bettors.”
As the leading prediction platform, Kalshi has found itself in the middle of a series of legal actions. Earlier this week, it lost a crucial court battle in Nevada, which resulted in the upholding of an operational ban with a possible permanent injunction on the horizon.
Arizona’s attorney general also filed criminal charges against the company, accusing it of offering illegal gambling services in what Kalshi CEO Tarek Mansour labeled a “total overstep.” A federal judge on Wednesday denied Kalshi’s preliminary injunction to keep the state from prosecuting it.
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