Stifel: Prediction Market Taker Volume Lags Sportsbook Handle Growth in September

Volume on regulated prediction markets jumped 64% month-over-month to $77 billion in September, but there are signs that sportsbooks are getting the better of their yes/no exchange rivals.

In a recent report, Stifel analyst Jeffrey Stantial highlights the comparison of prediction market taker volume — turnover attributable to retail traders, many of whom are sports-enthused — and sports book handle, noting that the latter’s September growth far outpaced that of the former. Taker volume is widely viewed as a better prediction market comparable to handle than notional volume.

The analyst notes that September taker volume on all-or-nothing exchanges regulated by the Commodity Futures Trading Commission (CFTC) was 23% of notional turnover on the top two U.S. prediction markets, meaning that when that percentage is extrapolated across the industry, taker volume was likely $17.7 billion in September, good for growth of 27%.

However, citing data from the states that have delivered September numbers, Stantial points out that regulated sportsbook handle increased 43% last month.

Why It Matters

Somewhat modest taker volume growth, particularly against the backdrop of the start of football season, may be a source of concern for prediction markets going forward.

The September taker volume/sportsbook handle comparison may also reiterate another point: when retail bettors have a choice between prediction markets and standard sportsbooks, many opt for the latter and some data points indicate all-or-nothing exchanges still aren’t stealing significant market share from sportsbooks. That’s a key point because sports remain the primary turnover driver for yes/no exchanges.

“CFTC-regulated single-wager sports-only volumes grew +23% month-over-month in September to $22.8 billion, though volume on ‘combos’ (parlays), which are effectively all sports, were up +122% to $41.6 billion,” adds Stantial.

‘Disruptors’ Posing Modest Threat

Volume on domestic prediction markets is largely centralized on two platforms, but some “disruptors,” or Tier-2 (T2) operators, are seen as viable competitors.

But that wasn’t the case last month as most of the T2 operators, including Rothera, which is jointly owned by Robinhood Markets (NASDAQ: HOOD) and Susquehanna International Group, struggled to gain noticeable market share.

Among the T2 market share gainers in September, DraftKings’ (NASDAQ: DKNG) DKeX saw notional volume increase 2% while “Novig also gained slight share following the controversial Sydney Sweeney ad campaign reaching 1.9% share in September,” said Stantial in the report.

Data confirm that following the first Sweeney commercial in September, downloads of the Novig mobile application and first-time depositors on the platform surged.