More Sizzle Than Steak
The threat posed to online sports betting by prediction markets may be mostly hype, according to David Katz of Jefferies Equity Research.
Reported prediction trading volumes may continue to grow, with a potential total addressable market (TAM) exceeding $100 billion. “But this greatly overstates the potential profitability of these markets,” and OSB operators are far ahead on handle, says Katz.
For example, Kalshi’s and Polymarket’s sports contracts businesses are downright anemic compared to DraftKings and FanDuel parent Flutter Entertainment. The established sportsbook giants reported $25.4 billion and $26.3 billion in comparable OSB handle in the first half of 2025, versus $1.5 billion managed by prediction markets.
Meanwhile, prediction markets’ access to California and Texas may not be as meaningful as it seems. Jefferies estimates that about 25 percent of Kalshi and Polymarket web visits already come from the most populous U.S. states, neither of which offers legal sports wagers.
But the approximate run-rate—about $1 billion a year in comparable OSB handle—doesn’t compare to the estimated $10 billion-plus per year that DraftKings and FanDuel would generate in the same markets.
Bottom line: For now, despite a “seemingly large TAM,” prediction markets have demonstrated “minimal earnings power,” Jefferies concludes.
