Sportsbook operators are trying to defend their core business by adopting the very market structure that is challenging it.Prediction markets have grown large enough that sportsbook operators now treat them as a strategic problem rather than a regulatory nuisance.
Kalshi’s valuation has reportedly climbed to $22 billion after a $1 billion financing round, while Polymarket closed a round at roughly $15 billion and is reportedly discussing a valuation above $20 billion.
Sportsbooks respond by entering that same exchange-style market and use prediction markets to expand distribution and protect customer relationships.
What Prediction Markets Remove from Bookmaking
Traditional sportsbooks do more than provide a customer interface. They price odds, manage liabilities, balance customer flows, and earn margin on the gap between stakes and payouts. DraftKings’ own filings describe sportsbook revenue through hold — the portion of handle retained after winning customers are paid.
Prediction exchanges provide a venue where counterparties trade event contracts, with liquidity supplied by other users and professional market makers. The economics are more transaction-led, and outcome risk sits mainly with trading participants rather than the venue itself.
The Financial Times has argued that this distinction matters because bookmaking expertise has historically been part of the sportsbook moat. Recent earnings prove the point.
DraftKings reported second-quarter revenue of about $1.44 billion, with sports outcomes and promotions weighing on profitability, and Flutter lowered its guidance after unfavourable sports results.
Those numbers shed some light on why a less outcome-dependent revenue stream is getting attention.
Sportsbooks Take Different Routes into Exchanges
DraftKings Predictions launched in December 2025 through a CFTC-registered subsidiary, giving the company access to event contracts in 38 states, including several large markets where online sports betting remains restricted.
Joel Shulman, founder and CIO of ERShares and portfolio manager of the XOVR ETF, says roughly 600,000 customers have engaged with the product. Annualised prediction-market volume, meanwhile, rose from about $2.3 billion in April to $11 billion in July.
DraftKings management has argued that prediction-market customers could have lifetime value comparable to sportsbook users, though the actual results are yet to be seen.
Flutter is taking a related but not identical route. FanDuel Predicts launched with CME in five states ahead of a planned wider rollout, and Flutter executives have argued prediction markets can be incremental where they reach users outside conventional sportsbook availability.
Flutter also says it’s already earning from prediction markets as a market maker, applying its odds-pricing infrastructure to event contracts.
Sporttrade shows the response can go further than adding another product tab. The company shut down sports wagering in five states and has applied to the CFTC to become both a Designated Contract Market and a Derivatives Clearing Organisation.
Validation or Self-Cannibalisation?
Shulman argues that DraftKings’ own behaviour validates the category it’s trying to defend against.
He says that if prediction markets were marginal to sportsbook economics, incumbents would have little reason to build exchanges, acquire infrastructure, and spend heavily on customer acquisition.
XOVR has exposure to Kalshi through a special purpose vehicle and owns DraftKings stock, and Shulman is also co-founder of Signal Markets, a CFTC-regulated introducing broker in event contracts.
Distribution may get users to try a product, but liquidity and product quality decide whether they stay.
DraftKings and Flutter may simply be hedging against regulatory uncertainty, widening their addressable market, or testing adjacent products without touching their core sportsbooks.
Still, their actions show prediction markets are being treated as a serious competitive category rather than a side bet.
DraftKings and Flutter carry advantages that prediction-market startups don’t automatically inherit – brands, existing customers, product design, promotions, pricing teams, and gaming-regulatory relationships.
Those assets can help them get into event contracts.
Distribution can bring users into a prediction product, but liquidity, pricing, and product depth determine whether they stay.
For sportsbook operators, the strategic test is whether they can add that model while keeping the economic case for traditional bookmaking clear.
Sportsbook operators are trying to defend their core business by adopting the very market structure that is challenging it.Prediction markets have grown large enough that sportsbook operators now treat them as a strategic problem rather than a regulatory nuisance.
Kalshi’s valuation has reportedly climbed to $22 billion after a $1 billion financing round, while Polymarket closed a round at roughly $15 billion and is reportedly discussing a valuation above $20 billion.
Sportsbooks respond by entering that same exchange-style market and use prediction markets to expand distribution and protect customer relationships.
What Prediction Markets Remove from Bookmaking
Traditional sportsbooks do more than provide a customer interface. They price odds, manage liabilities, balance customer flows, and earn margin on the gap between stakes and payouts. DraftKings’ own filings describe sportsbook revenue through hold — the portion of handle retained after winning customers are paid.
Prediction exchanges provide a venue where counterparties trade event contracts, with liquidity supplied by other users and professional market makers. The economics are more transaction-led, and outcome risk sits mainly with trading participants rather than the venue itself.
The Financial Times has argued that this distinction matters because bookmaking expertise has historically been part of the sportsbook moat. Recent earnings prove the point.
DraftKings reported second-quarter revenue of about $1.44 billion, with sports outcomes and promotions weighing on profitability, and Flutter lowered its guidance after unfavourable sports results.
Those numbers shed some light on why a less outcome-dependent revenue stream is getting attention.
Sportsbooks Take Different Routes into Exchanges
DraftKings Predictions launched in December 2025 through a CFTC-registered subsidiary, giving the company access to event contracts in 38 states, including several large markets where online sports betting remains restricted.
Joel Shulman, founder and CIO of ERShares and portfolio manager of the XOVR ETF, says roughly 600,000 customers have engaged with the product. Annualised prediction-market volume, meanwhile, rose from about $2.3 billion in April to $11 billion in July.
DraftKings management has argued that prediction-market customers could have lifetime value comparable to sportsbook users, though the actual results are yet to be seen.
Flutter is taking a related but not identical route. FanDuel Predicts launched with CME in five states ahead of a planned wider rollout, and Flutter executives have argued prediction markets can be incremental where they reach users outside conventional sportsbook availability.
Flutter also says it’s already earning from prediction markets as a market maker, applying its odds-pricing infrastructure to event contracts.
Sporttrade shows the response can go further than adding another product tab. The company shut down sports wagering in five states and has applied to the CFTC to become both a Designated Contract Market and a Derivatives Clearing Organisation.
Validation or Self-Cannibalisation?
Shulman argues that DraftKings’ own behaviour validates the category it’s trying to defend against.
He says that if prediction markets were marginal to sportsbook economics, incumbents would have little reason to build exchanges, acquire infrastructure, and spend heavily on customer acquisition.
XOVR has exposure to Kalshi through a special purpose vehicle and owns DraftKings stock, and Shulman is also co-founder of Signal Markets, a CFTC-regulated introducing broker in event contracts.
Distribution may get users to try a product, but liquidity and product quality decide whether they stay.
DraftKings and Flutter may simply be hedging against regulatory uncertainty, widening their addressable market, or testing adjacent products without touching their core sportsbooks.
Still, their actions show prediction markets are being treated as a serious competitive category rather than a side bet.
DraftKings and Flutter carry advantages that prediction-market startups don’t automatically inherit – brands, existing customers, product design, promotions, pricing teams, and gaming-regulatory relationships.
Those assets can help them get into event contracts.
Distribution can bring users into a prediction product, but liquidity, pricing, and product depth determine whether they stay.
For sportsbook operators, the strategic test is whether they can add that model while keeping the economic case for traditional bookmaking clear.