Citizens: Prediction Market Threat to Sports Betting Is Easing

With sports event contracts driving a substantial portion of prediction market volume, yes/no exchanges are widely seen as competitive threats to traditional online sportsbooks.

While 12-month stock declines for operators like DraftKings (NASDAQ: DKNG) and Flutter Entertainment (NYSE: FLUT) reflect those market fears, new research suggests the threat may be overblown.

In a new report to clients, Citizens Equity Research analyst Jordan Bender says that prediction market cannibalization of regulated online sportsbooks isn’t worsening and may be easing.

Citing data from betting analytics firm Juice Reel, the analyst noted that just 4% of regulated sportsbook handle has permanently migrated to prediction markets. If anything, prediction market operators may actually benefit traditional sportsbooks by expanding the overall audience interested in sports wagering.

Of note to both the prediction market and sports wagering industries, bettors that embrace both platforms are typically bigger spenders. Bender points out that “online sports betting wallet size increased 27% in the six months following adoption” of an event contract platform.

But Prediction Markets Are Legitimate Competition

While cannibalization concerns may be easing, that doesn’t eliminate the clear competitive threat posed to regulated sportsbooks by prediction markets.

“It is clear that prediction markets are becoming a meaningful source of competition for traditional sports betting, with prediction market bets now representing 11% of combined wagering across sports betting and prediction markets, up from essentially zero earlier last year,” adds Bender.

The emerging rivalry between the two sectors is one reason several sportsbook operators—including FanDuel parent Flutter Entertainment—are committing to heavy promotional spending this football season, a strategy that has unnerved Wall Street investors.

Still, prediction market volume figures may need to be consumed with grains of salt because as Bender points out, those data points are influenced by sharps, VIPs and whales — bettors who are often limited or turned away from traditional regulated sportsbooks.

Flutter, Super Group Seen as Betting Equity Winners

Acknowledging that Flutter’s “story has been messy” over the past 12 months, Bender highlights the stock as one to own into and over the course of the 2026 football season, citing leadership changes and rising sports betting market share.

He also expressed a preference for Super Group (NYSE: SGHC), which is something of a prediction market “antidote” play because the company operates an iGaming-first model and doesn’t book sports bets in the ultra-competitive U.S. market.

Bender says that stock trades at a valuation discount while the company has “the clearest path to sustainable growth” among the online gaming names in his coverage space.