Why sports prediction markets are booming
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A growing number of companies are dipping their toes in sports prediction markets amid a national regulatory vacuum on sports betting.
Why it matters: Sports gambling is traditionally regulated on a state-by-state basis, but prediction markets are offering betting opportunities that transcend state lines.
Driving the news: U.K.-based media predictions firm Galactic announced a partnership Wednesday with the Sports Illustrated brand to launch SI Predict.
- It's "a new prediction platform that deepens fan engagement by allowing them to interact directly with lifestyle moments adjacent to live sports events," according to Galactic.
- Users will be able to trade contracts on "the outcomes of trends and themes around major global sporting events" but not on the outcomes of the games themselves.
The big picture: It's the latest in a series of prediction market offerings that are veering into sports.
- Kalshi, which is regulated by the Commodities Futures Trading Commission (CFTC), has opened up sports event trading contracts in all 50 states. Trading app Robinhood has introduced Kalshi prediction markets on its platform.
- Polymarket (which is legally unavailable for U.S. users) and Crypto.com are also offering sports prediction markets.
Friction point: The announcements have come while state and U.S. regulators are still sorting out their stance on the whole thing.
- While the CFTC will host a roundtable in late April to discuss its approach sports event contracts, at least two states — Nevada and Massachusetts —have reportedly contested, or are probing, specific offerings.
Reality check: Few observers expect the Trump administration or Congressional Republicans to lower the hammer despite a degree of bipartisan consternation in Washington over the negative societal effects of sports gambling.
- CFTC acting chair Caroline Pham sent positive signals in February when she assailed the agency's "past hostility to innovation" in this area and called prediction markets "an important new frontier ... to assess sentiment to determine probabilities that can bring truth to the Information Age."
What they're saying: "It's very unlikely you're going to get somebody at the federal level saying you can't do this," Dustin Gouker of Closing Line Consulting tells Axios.
- "That seems like an unlikely outcome. So then you're betting on whether states are going to play whack-a-mole with your product."
By the numbers: Users are so far embracing the offerings. Kalshi's sports betting prediction market has generated $249 million in contracts through the first two rounds of the NCAA Basketball Tournament.
- That's 8% of the estimated $3.1 billion in legal wagering for this year's men's and women's NCAA Tournaments, Bettors Insider noted.
What we're watching: Whether the established giants in sports betting — namely DraftKings and FanDuel — delve into prediction markets.
- DraftKings CEO Jason Robins said earlier this month that the company views prediction markets as a potential opportunity: "We're watching it carefully," he said of the CFTC review, "because if there is an opportunity that presents itself, we want to make sure we're prepared for it."
- DraftKings recently registered a potential business called DraftKings Predict with the National Futures Association, a self-regulatory group for the derivatives industry, according to Gouker's The Closing Line newsletter.
