Citizens Argue Sports Betting Cannibalization from Prediction Markets May Be Slowing Down

Key Points Citizens report says prediction market cannibalization may not be gathering steam In fact, prediction markets may be bringing more people to sports betting as a whole However, this does not change the fact that prediction markets hold about 11% of the combined share of event contracts and sports betting activity

Key Points

Citizens report says prediction market cannibalization may not be gathering steam

In fact, prediction markets may be bringing more people to sports betting as a whole

However, this does not change the fact that prediction markets hold about 11% of the combined share of event contracts and sports betting activity

Citizens Equity Research analyst Jordan Bender has taken a look at the current relationship between traditional sports betting and prediction markets, arguing that the previously feared cannibalization may be overestimated.

Citizens Equity Research

Jordan Bender

Prediction Markets Are Not the End of Sports Betting Companies

In fact, Bender argues in a new report to clients that cannibalization, i.e., the practice of one vertical eating into the consumer base and profits of another, may not be increasing and could, in fact, be slowing down or lessening. 

the practice of one vertical eating into the consumer base and profits of another

Although the American Gaming Association (AGA) has warned that the most recent NFL sports betting handle has fallen flat due, not least, to the rise of prediction markets, Bender has noted that only 4% of regulated sportsbook handle has shifted to prediction markets permanently.

American Gaming Association

only 4% of regulated sportsbook handle

Companies in the prediction market sector have been good at marketing their products, notes the analyst, but this has not necessarily been a bad thing for sports betting as a whole – in fact, it may have contributed to expanding interest in traditional sports betting as well.

it may have contributed to expanding interest in traditional sports betting as well

“Prediction market companies are successfully using marketing initiatives to bring new customers into the ecosystem who otherwise may not have entered the industry or would have eventually gravitated toward sports betting apps,” Bender noted, and commented on cannibalization specifically: 

“Cannibalization not getting worse and customers spending more is a bullish signal heading into the NFL season, leading us to believe handle will start to accelerate in 4Q26E.” 

Cannibalization not getting worse and customers spending more is a bullish signal heading into the NFL season, leading us to believe handle will start to accelerate in 4Q26E

Legacy Betting Companies Answer the Call to Arms – Venture into Event Contracts

Bender, however, is not oblivious to the clear signs that prediction markets are eating into traditional sports betting handle and revenue, with the sector now representing 11% of combined wagering across both sports betting and event contracts.

The threat of prediction markets eating into new consumer bases, and even their established ones, has prompted numerous companies to seek a path to the vertical themselves, including but not limited to DraftKings, FanDuel, and Fanatics, which have all quit the American Gaming Association, supposedly over disagreement on the issue. 

companies to seek a path to

the vertical themselves

DraftKings

FanDuel

All three of the aforementioned legacy betting companies have launched forays into the prediction market space, hoping to leverage the simplified UI to strike home with younger audiences, who are more likely to engage with these products.

aforementioned legacy betting companies have launched forays into the prediction market space

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prediction markets

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