Research: Prediction markets don't necessarily offer superior "odds" to sportsbooks

• Prediction markets like Kalshi claim superiority over sportsbooks, yet research shows their pricing often fails to outperform traditional betting operators
• Citizens JMP Securities found that NFL markets on Kalshi were frequently more expensive than those on DraftKings and FanDuel, despite the platform not setting odds itself
• As things stand, prediction markets do not pose a real competitive threat to established sportsbooks in regulated U.S. markets

Listen to the average prediction market platform, and they would point out to the fact that their product is simply better, although - make no mistake - it is not gambling or sports betting per se.

The platforms, you see, do not set the "odds" themselves, and rather offer outcomes. They are regulated under the CFTC, and not some litigious state regulator, alleging that these companies are, in fact, offering an unlicensed gambling platform.

Sportsbooks are still not outpriced by prediction markets

While it is for the courts to decide whose laws should rule over sports event contracts, research by Citizens JMP Securities now takes a look at the first claim: the value of prediction markets' "odds," i.e., the outcomes you can "bet" on for want of a better word.

Conducted earlier in December, the research compared specific game-day events for the National Football League offered by Kalshi against mainstream competitors and their sportsbooks, DraftKings and FanDuel (note, both companies have also launched prediction market platforms).

In a statement, Citizens JMP said: "Currently, we do not view betting exchanges as a competitive threat to profitability for existing operators - DraftKings, Flutter (FanDuel), MGM Resorts (BetMGM), Caesars Entertainment, PENN Entertainment (ESPN BET), and Rush Street Interactive (BetRivers) in the legal sports betting states and do not expect to see reactionary promos/marketing as a result."

Not only are the markets not at a significant difference in terms of value, but Kalshi argues that the analysts are still not in a position to compete with traditional sports betting operators.

During the observed week, Kalshi offered pricier markets than both DraftKingsand FanDuel, although this could be just a temporary snag, as the platform is still very young and it may be figuring out the ropes, and specifically does not set any odds itself but offers a field where people "bet" against each other.

Prediction markets face uncertainty, but interest in the segment is sustained

The final result is, however, that the overall value of the markets is reduced. Citizens have also argued against other common ideas usually associated with prediction markets and why they should, in theory, surpass traditional sportsbooks: better pricing and cash-out options, but neither is true, the analysts argue.

Despite this, the fact remains that FanDuel, DraftKings and Fanatics have been willing to surrender their gaming licenses, leave the American Gaming Association, and launch dedicated platforms focused on prediction markets.

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