Prediction Markets Could Reshape U.S. Sports Betting, Report Finds
Prediction markets could redraw the map of U.S. sports wagering and trading.
LISTEN TO THIS ARTICLE:A December study by Newport Beach research firm Eilers & Krejcik projects that prediction markets could grow into a roughly $1 trillion industry if fully developed, with about $435 billion coming from contracts tied to sporting outcomes. Those forecasts arrive as a legal and regulatory confrontation plays out in Nevada and in federal courts, creating uncertainty for operators, regulators and land-based sportsbooks.
The dispute centers on KalshiEx LLC, a New York-based exchange that began offering binary, yes-or-no contracts on sporting events in early 2025. Nevada gambling regulators concluded those sporting contracts amounted to wagering and initiated enforcement actions. In March, Kalshi sued individual members of the Nevada Gaming Control Board and the Nevada Gaming Commission; the Nevada Resort Association joined the case because the exchange’s activities intersect with sportsbook operations at commercial casinos.
In November, U.S. District Judge Andrew Gordon lifted a preliminary injunction that had been allowing Kalshi to offer sports contracts while litigation proceeded. Kalshi declined to stop operating in Nevada and is appealing the district court ruling to the Ninth Circuit Court of Appeals. Competing platforms, including other retail brokerages and crypto firms, agreed to halt similar activity in Nevada amid regulator pressure, but Kalshi has persisted as it pursues appellate relief.
Nevada Gaming Control Board Chair Mike Dreitzer issued guidance in October asserting that event contracts tied to sports may be offered in Nevada only by entities holding a nonrestricted gaming license with sports pool approval and meeting other sports wagering requirements, including wagering accounts and sportsbook systems. Dreitzer’s memorandum signaled the state’s intent to treat prediction market sports contracts as a form of regulated gambling.
Related: Survey: 90% of Americans Support Access to Prediction Markets
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Market Potential, New Products and Open Questions
Eilers & Krejcik’s 32-page report sketches both aggressive upside and considerable uncertainty. The authors argue that prediction markets could bridge betting and trading, and that product development – particularly offerings that mimic the emotional and payout characteristics of sportsbook parlays – will be critical to competitiveness. The report notes that parlays account for more than half of gross gaming revenue at many sportsbooks, and it flags the introduction of same-game parlay-style contracts as a direct effort by exchanges to win market share.
“Prediction markets could become an important catalyst for reshaping both the betting and trading industries, and may increasingly blur the line between the two”, Eilers & Krejcik wrote in its executive summary, while also warning of “myriad patches of risks, unknowns and uncertainties” along the way.
Industry lawyers and analysts are already tracking the flow of new designated contract markets and commission merchants seeking to operate prediction contracts under Commodity Futures Trading Commission rules. Alan Wilmot, a partner at Heitner Legal PLLC in Fort Lauderdale and a frequent commentator on market structure, noted recent momentum: “Last year saw 12 organizations submit and/or otherwise become designated as a DCM (designated contract market), a 500 percent increase compared to 2024; this number does not include those who sought to become future commission merchants in order to offer prediction markets in partnership with DCMs.”
The Eilers & Krejcik forecast breaks down potential trading volume beyond sports: $310 billion for financial and crypto event contracts, $160 billion for news-related markets, $40 billion for culture topics and $55 billion in other categories. But the report stresses that non-sports liquidity will be essential; without robust non-sports participation, the bull case for prediction markets weakens.
Analysts say several open questions will determine the trajectory: Will exchanges develop truly novel cross-genre parlays? Will broadened distribution and lower friction translate into mass consumer adoption? And might regulated sportsbook operators pivot to prediction markets if regulatory barriers and state tax burdens make traditional models less attractive?
Legal Timeline to Watch
Key milestones to follow include Kalshi’s original Nevada entry in early 2025, the March filing against Nevada regulators, Judge Andrew Gordon’s November decision dissolving the preliminary injunction, and the ongoing Ninth Circuit appeal. Eilers & Krejcik anticipates that major legal questions could persist through multiple appeals and potentially reach the U.S. Supreme Court by 2027, a timeline that would shape how quickly exchanges can achieve the broad access and product parity that underpin the report’s large-scale projections.
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