A Burning Question
Sports betting handle growth has stalled, but are prediction markets to blame?
The Bulletin Board
THE LEDE: Are prediction markets cannibalizing sportsbooks?
VIEWS: Prediction markets are the talk of the town. Is that a good thing?
STRAY THOUGHTS: The reason for today’s truncated newsletter.
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The Lede: Are Prediction Markets Cannibalizing Sportsbooks?
Are prediction markets cannibalizing legal sports betting? Given the similarities, it seems quite likely:
Still, some believe that despite the growth of prediction markets, it isn’t and won’t harm sports betting revenue:
Dustin Gouker wrote about this yesterday, noting that the data is super messy, particularly given rising revenue:
“It’s getting difficult to ignore the decline in handle in state-regulated sports betting. However, I still caution people wanting to make sweeping conclusions about this data.
Handle across reporting states so far (with a decent amount of data still to come) is down about 5%. However, revenue is up sharply, over 40% from what was a terrible March for sportsbooks in 2025.”
You’d be hard-pressed to find someone in the industry who has spent more time looking into cannibalization than me, and I am seeing evidence of [early-stage] cannibalization.
However, the obvious evidence is the year-over-year handle stagnation/declines in legal sports betting markets (revenue is fickle month-to-month and year-over-year), but there are all sorts of reasons besides cannibalization that sports betting handle could be declining:
Markets are maturing
Operators are pulling back on bonuses
Bans on markets, credit cards, etc.
And then there are the more esoteric claims like “recycling”, bad Super Bowl matchups/results, and so on, like the below tweet.
These all have merit, but I find it intriguing that sports betting handle is dipping at the same time prediction market volume is rising — the American Gaming Association’s monthly revenue tracker shows four consecutive months of YOY handle decline/softening, a trend that has not extended to online casino revenue.
It’s also interesting that sports betting stock prices are taking a bath at the same time prediction market valuations are soaring.
As I previously wrote, the same arguments online operators have made about the land-based industry’s cannibalization concerns are being repeated by prediction market supporters: “Prediction markets don’t cannibalize traditional sportsbooks, just look at the revenue numbers of both; they are growing in unison. Or, the customer base is different.”
The truth is two-fold:
Cannibalization takes time. As I wrote, “If we use the term demand shift (which is what cannibalization is in the gambling world), slow-burn cannibalization makes far more sense… Adoption of new products or delivery channels takes time. The changes, like the data in Atlantic City, are subtle, and often messy.”
And on that last point, gambling data is inherently messy. New casinos open, others close, and online options — black, gray, and white — get added piecemeal. Every land-based casino market is in a perpetual state of flux, and data can be made to say almost anything you want. It’s how you get conflicting reports from reputable firms that essentially say the opposite.
Cannibalization is a slow burn, and companies can mask any negative KPIs with policies that make other KPIs look good. But that strategy can’t last forever.
And let’s be clear, the cannibalization of sportsbooks by prediction markets is going to be slower given prediction markets have largely focused on states that lack legal sports betting.
As I wrote:
“Amazon didn’t kill bookstores in a year, but over a decade, consumer preferences tilted toward online convenience, leading to widespread closures. Or streaming services like Netflix versus cable TV: initial growth coexisted, but eventually, cord-cutting became the norm… In gambling, we’ve seen similar patterns, even if total industry revenues mask the transition for a while.
“I still don’t believe stalling online legalization is the answer, as I wrote in the past, ‘We can’t pretend Blockbuster would still be with us if we prohibited Netflix.’”
But as I’ve also said many times, the answer isn’t burying your head in the sand and hoping the problem goes away:
“Is there seepage from land-based gambling to online? I think it would be difficult to argue there isn’t… Instead of asking how long we can preserve the current ecosystem and delay the inevitable, they should ask where they fit in. How can my organization mitigate or embrace online gambling to future-proof our business and bring in younger customers?
Views: Everyone Is Talking About Prediction Markets
I had to travel for (non-prediction market) work this weekend, which meant I was in a hotel room and turned the TV on, something I rarely do at home. I decided to escape prediction market talk and see what was going on in the world and flipped over to CNN. And lo and behold, one of the first segments yesterday morning was prediction markets.
How inescapable has prediction market discourse become? Here’s a short list of the headlines and digital media I’ve come across over the last week:
Wanna bet? Washington steps up scrutiny of prediction markets [AP]
Do prediction market bettors make anything better? [NPR]
Gary Gensler Paved the Way for Prediction Markets. Sports Betting Wasn’t Part of the Plan. [Barron’s]
Investing is starting to look like a casino [Morning Brew]
Polymarket wants to be ‘news 2.0.’ Is this a safe bet? | Opinion [USA Today]
Betting on the news raises ethical questions for journalists [The Verge]
Gaming Commission Chair Maynard goes ‘On the Record’ about sports betting, prediction markets [WCVB]
Betting your future: Is gambling a threat to your career and well-being? [US Army]
Billionaire Investor Warns Sports Prediction Markets Harm Men [Bloomberg]
The theory is that no press is bad press, but in my experience, that ode to relevancy (attributed to P.T. Barnum) doesn’t apply to gambling. As ostentatious as casinos are, with few exceptions, they keep their heads below deck. They don’t get into public fights or seek attention for the sake of attention.
What ends up happening is blowback. You can’t lose the mob, especially if you created it — The below echoes something I’ve been saying all along, whether it’s prediction markets or sports betting:
Stray Thoughts
As noted above, I had to travel for work this weekend, so today’s newsletter is a bit shorter than usual.