Prediction Markets Pilfering Just 5% of Legal Sportsbook Handle, Says Analyst

• Research firm estimates approximately 5% of regulated sportsbook handle has been redirected to prediction markets
• That works out to about $8 billion of annual handle
• Analyst calls it a “wash” for major sportsbook operators

For all the commotion and 2025 downside incurred by shares of major sportsbook operators, the reality is that prediction markets aren’t stealing significant business from gaming companies.

In a new report to clients, Citizens Equity Research analyst Jordan Bender, citing Juice Reel data, estimates prediction markets are stealing approximately 5% of regulated sportsbooks’ handle, or roughly $8 billion. But handle isn’t revenue. Rather, handle reflects the total volume of wagers placed.

Bender notes that 5% is slightly higher than previously believed, but it doesn’t represent a downside catalyst for stocks like DraftKings (NASDAQ: DKNG) and FanDuel parent Flutter Entertainment (NYSE: FLUT).

From a company perspective, we believe this is a wash for DraftKings, FanDuel (Flutter), and Fanatics, which are live with prediction market offerings,” observes Bender.

Sportsbook operators with no prediction markets exposure, including Bet365, BetMGM, Caesars, Penn Entertainment, and Rush Street Interactive could encounter “slightly negative” scenarios at the hands of prediction markets, says the analyst. However, Rush Street Interactive (NYSE: RSI) was one of last year’s best-performing gaming equities, and as an iGaming-first name, it has some insulation against prediction markets. The company previously said it could benefit from yes/no exchanges creating sports betting tax erosion in various states because that could motivate more states to approve iGaming.

Prediction Market Users Burning Their Cash

While there’s no denying the arrival of football season pushed prediction market volume to record heights, that hasn’t been to the benefit of retail clients who are more rapidly losing money on those platforms than they are through other forms of wagering.

“Said another way, prediction markets are creating worse losses for the worst users, while more educated bettors are winning more,” notes Bender. “We also believe retail is losing at a higher rate with prediction markets offering worse pricing for the average user while also competing against market makers and educated bettors with pricing models and official sports data.”

Over the course of the 2025 NFL season, Kalshi’s pricing was consistently worse than what was seen on DraftKings and FanDuel, according to Bender’s research.

Other Interesting Prediction Market Nuggets

Bender reiterates the view that gaming stock downside at the hands of prediction markets is overdone, noting shares of DraftKings and Flutter are down 33% and 30%, respectively, from their 52-week highs, but the impact of business lost to yes/no exchanges doesn’t represent anything close to that level of cannibalization.

To put the impact into a more digestible format, one bad “Monday Night Football” game could have the same negative result on EBITDA as the total impact the prediction market space is currently having on the sector,” says the analyst. “Additionally, incremental legalization over time will shrink the prediction market total addressable market through a superior product offering (online sports betting), in our view.”

As for regional implications, the Juice Reel data indicate states such as Florida, Georgia, and Texas aren’t yet in the prediction markets pantheon. It’s New York, New Jersey, California, Washington, and Ohio leading the way.