$1.1T Sports Prediction Market Volume Forecasted by Bank of America

Bank of America has forecasted that sports event contracts on prediction market like Kalshi and Polymarket could reach an annual volume of $1.1 trillion, marking an elevenfold increase from the estimated $100 billion expected this year. This projection suggests that prediction market operators could generate $10 billion in annual revenue based on a 1% commission rate.

The report underscores the growing dominance of sports event contracts within prediction markets, with nearly 80% of Kalshi‘s March volume attributed to sports. While the platform also sees substantial activity in cryptocurrency derivatives and cultural/political event contracts, sports remain its primary focus.

Bank of America analysts highlight that Kalshi is becoming deeply integrated into daily life, offering always-on odds across various sectors including finance, crypto, pop culture, and sports. The bank estimates Kalshi commands a commanding 90% share of U.S. event contract activity, with Crypto.com holding just 4%. This dominance is partly attributed to Polymarket not yet being fully operational in the U.S.

The report explains the appeal of prediction markets for sharp bettors. ‘Sharp bettors are typically banned or limited on regulated sportsbooks for beating the house too frequently,’ the analysts state. ‘For these bettors, who often wager 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 maker against casual bettors.’ Platforms like Kalshi further incentivize these high rollers by reducing or eliminating fees in exchange for liquidity.

The market projections have already impacted traditional sports betting stocks, with DraftKings and Flutter Entertainment (owner of FanDuel) seeing their shares decline by 7.06% and 3.89% respectively, following the report. Over the past year, both stocks have experienced significant declines—DraftKings by 38% and Flutter by 55.5%—as prediction markets continue to challenge traditional sports betting models.

Prediction markets hold distinct advantages over traditional sportsbooks, including federal regulation that currently allows yes/no exchanges to operate in states where sports betting isn’t legal. They also attract a younger demographic and face less clarity around taxation, providing them with a competitive edge in the evolving iGaming landscape.