Stifel: Prediction Market Growth Lags Sportsbooks On Comparable Basis
Research from Stifel finds prediction markets posted strong headline volume in September but grew more slowly than regulated sportsbooks once notional figures are stripped out.
Prediction markets handled more than $82 billion in trading during September, according to research from Stifel reported by Legal Sports Report, though the firm found growth lagged traditional sportsbooks once the figures are adjusted for comparability.
Federally regulated prediction markets accounted for $76.7 billion of that total, a 64% jump from August. Stripped down to a measure closer to how sportsbooks report handle, however, Stifel pegged growth at 27%, versus a 43% month-over-month rise in regulated sports betting handle across states that have published September results.
Stifel said the gap points to possible early saturation and customer churn in the prediction-markets sector, even as operators such as Kalshi and Polymarket continue to pour money into acquiring users and refining their products.
Sport remained the engine of prediction-market activity. Contracts tied to single sporting events brought in $22.8 billion, a 23% rise on August, while parlay-style combination contracts more than doubled to $41.6 billion. Between them, sports and parlay wagers made up 83% of all trading on Kalshi.
Those headline figures carry a caveat: notional volume can flatter actual betting activity, since parlay contracts bought for a few cents are still recorded as a full dollar of volume. That quirk widens the gap between reported trading totals and what customers genuinely stake, and it complicates direct comparison with sportsbook handle.
To correct for this, Stifel calculated a taker-only volume figure of $17.7 billion across exchanges regulated by the Commodity Futures Trading Commission, drawing on trading patterns at Kalshi and Polymarket US. That measure sits closer to a traditional handle figure, though it can still include transactions generated when traders close out positions.
Kalshi's share of regulated prediction-market volume slipped to 79% in September from 86% in August, as rival platforms picked up ground.
Traditional sportsbooks, meanwhile, showed signs of reacceleration. Handle across 13 reporting states rose an estimated 4% year on year in September, despite the NFL schedule running one week shorter than a year earlier. Gross gaming revenue fell 9% as results broadly favoured bettors. FanDuel continued to add handle share, while DraftKings posted gains in online casino market share, per Stifel.
The firm said it remains positive on the sector's long-term prospects, citing mispriced predictions and early signs of a handle rebound, but it struck a more cautious near-term tone ahead of third-quarter results. Stifel wrote that it is "taking a cautious view into Q3 earnings given potential step-up in PM investment."
That investment could intensify. DraftKings may bring forward some of its planned 2026 prediction-market spending, Stifel noted, while Fanatics has signalled it could nearly triple its marketing budget next year.
Separately, trading-volume figures across prediction markets have come under outside scrutiny. The Wall Street Journal reported on Saturday that $108 million of $167 million in transactions on ADI Predictstreet, a prediction-market partner tied to FIFA's World Cup, originated from interconnected cryptocurrency accounts apparently linked to the platform itself.
Stifel also flagged that several exchanges, including Kalshi and DraftKings' DKeX, have begun scaling back incentives offered to traders as market liquidity improves — a sign, the firm said, that platforms are now attracting sufficient activity without needing to subsidise market makers as heavily.
Investors are expected to press operators for more detail on how prediction-market competition and rising spending are affecting sportsbook growth and profitability when major companies report third-quarter earnings in the coming weeks.