Prediction markets hit the mainstream in the U.S. in 2025 as the two global leaders, Kalshi and Polymarket, started offering predictions on sports events last year. But it is the sports events market that has really sent prediction markets in the U.S. into overdrive. For Kalshi alone, it drives some 85% of its action. What…
Prediction markets hit the mainstream in the U.S. in 2025 as the two global leaders, Kalshi and Polymarket, started offering predictions on sports events last year. But it is the sports events market that has really sent prediction markets in the U.S. into overdrive. For Kalshi alone, it drives some 85% of its action.
What exactly are prediction markets? It’s similar to betting, although different enough that it isn’t as highly regulated. That distinction has become a bone of contention with actual sports betting and gambling companies. But let’s set that aside for the moment.
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Essentially, prediction market platforms allow users to buy and sell contracts based on the outcomes of future events (elections, sporting events, and economic indicators are popular examples), almost like stock trading. If you think the Boston Celtics basketball team, for example, will beat the N.Y. Knicks, you invest in a contract stating that, and others buy similar “shares” based on the estimated probability of the contract being fulfilled or failing. Each contract, or share, pays out $1 if you win and $0 if you lose. The contract transactions can get even more complicated depending on various probabilities.
Neither Kalshi nor Polymarket — the two most popular of these prediction markets — is public. There are, however, publicly traded companies that have initiated their own prediction markets; Robinhood(NASDAQ: HOOD) and DraftKings(NASDAQ: DKNG) are two top choices.
Image source: Getty Images.
Robinhood launched its prediction market last August, and it is the fastest-growing new product in the company’s history. In the fourth-quarter earnings report, Robinhood management said the company had 12 billion event contracts traded, generating about $300 million in run-rate annual revenue, meaning that’s how much revenue there would be across 12 months at the rate things are going.
In January, contracts accelerated, with some 3.4 billion event contracts traded, a 17% increase over December. This record surge would push the annual run rate revenue to $435 million, based on growth in the next few months.
In the fourth quarter alone, prediction markets, listed in the “other” category, accounted for about $147 million in revenue, or about 12% of total revenue and almost 19% of all transaction-based revenue.
On its most recent earnings call, CEO Vlad Tenev said this is just “the beginning of a prediction market supercycle that could drive trillions in annual volume over time.”
Robinhood currently partners with Kalshi for its prediction market platform and shares some of the revenue. But it recently established a joint venture with Rothera and Susquehanna International to build its own platform, which would essentially cut out the middleman and allow Robinhood to keep a bigger slice of the revenue and improve unit economics. This should help solidify its standing in this rapidly growing market.
DraftKings is part of a duopoly in online sports betting along with its rival FanDuel, which is owned by Flutter Entertainment(NYSE: FLUT).
In December, it launched its own prediction market, which has already had a major impact. It essentially gives DraftKings a massive revenue opportunity in markets where online sports betting is not legal, including three of the largest U.S. markets — California, Texas, and Florida.
On the Q4 earnings call, DraftKings CEO Jason Robins called it “the most exciting new growth opportunity we have seen” since 2018. While there are no revenue numbers yet, Robins said it saw huge engagement related to the NFL’s Super Bowl, with three times its previous daily record for trading volume. Robins said predictions represent a $10 billion annual gross revenue opportunity in the coming years. “Our goal is simple; we intend to lead the predictions category,” he said on the earnings call.
DraftKings did not include predictions market revenue in its guidance for fiscal 2026, which led to a lower-than-expected outlook. That is one reason the stock has been tanking this year, down 34%. But prediction markets should certainly drive revenue for DraftKings right away, particularly in those states where online sports betting remains illegal. It should put DraftKings in a prime position to beat estimates.
Also, like Robinhood, DraftKings is building its own exchange after acquiring the event contract exchange Railbird. It will roll out its Railbird-powered exchange this year.
With its reduced valuation and prediction markets upside, Wall Street analysts see big things for DraftKings stock. It has a median price target of $35 per share, which would suggest 54% upside for the stock.
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Dave Kovaleski has no position in any of the stocks mentioned. The Motley Fool recommends Flutter Entertainment Plc. The Motley Fool has a disclosure policy.
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