Prediction Markets: Breakthrough Gambling Trend or a Threat to Bookmakers?

The emergence of prediction markets has sparked heated debate and expert discussions within the iGaming industry. Some representatives consider the niche a natural evolution, while others see it as serious competition for traditional bookmaker offices.

A podcast from Next.io was dedicated to this issue and featured:

• Lloyd Danzig, Sharp Alpha’s Managing Partner;
• Benjie Cherniak, Avenue H Capital’s Principal.

In this article, Casino Market’s team shares insights from the 2 specialists on prognosis platforms, assessing their potential and long-term investment prospects.

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Basic Essence of Prediction Projects

The term refers to portals where users trade contracts with the outcomes of future events. The capabilities of such websites extend far beyond traditional sports.

For instance, participants can bet on:

• the champion of the FIFA World Cup;
• the winner of the presidential election;
• the launch date of a new Apple gadget;
• weather conditions on another continent, etc.

The platform’s mechanics are as close as possible to those of stock exchanges: instead of fixed odds, as on betting web resources, users buy and sell a specific result’s “shares.”

How a prediction market works in practice:

1. Issuing a contract. Each new offer receives a flexible price from 0 to 100 cents. The cost is determined based on the combined probability assessment of the event by all participants. For instance, if a stock is trading at 70 cents, the community evaluates the chance at 70%.
2. Closing trading. If a particular outcome happens, its supporters get 100 cents. When the occasion fails to occur or the result is different from what was expected, there are no payouts.
3. Sharing profit. Gain or loss is the difference between the stock purchase/sell price and the final value of the closed contract. Trading is possible before the event, and expenses/revenue are recorded in the same way as in a traditional securities exchange.

The fundamental difference between prediction markets and betting portals is that bids are placed not against the bookmaker: users compete with other independent participants. The platform provides only the tech infrastructure for deals and charges a small commission for mediation.

This model guarantees clients fair pricing, including the ability to increase odds for experienced players (“sharps”). Such a format operates under a different principle than traditional sports wagering platforms. Prognosis systems strive to maintain equal conditions for all visitors.

Blurred Lines Between Gaming and Investment

One of the main questions raised by the appearance of prediction markets is: where does betting end and financial speculation begin? Currently, the distinction seems rather arbitrary and largely depends solely on legislation.

Assessing probabilities is a basic human brain skill, actively applied in everyday life. Prognosis websites formalise these familiar operations. The strategy has spurred technological progress and the creation of a regulatory framework that allows for lawful sales.

Today, operating in the niche requires permits not from gambling authorities but from government financial agencies, such as the American Commodity Futures Trading Commission (CFTC). This aspect has prompted iGaming providers and operators to rethink their approach to the exchange market and begin exploring a new vertical.

Reasons for Bookmakers Moving to Trading

In August 2025, FanDuel, a leader in the US gambling segment, announced a strategic partnership with CME Group. The companies began developing their exclusive product based on a prediction model. Other leading enterprises, such as DraftKings and BetMGM, are implementing similar projects.

This move is directly related to a couple of significant factors:

Circumventing Regulatory Restrictions

Entering a new niche allows operators to bypass strict state-level protocols. To work in the common betting sector, an entrepreneur must:

• ensure compliance with local legal requirements;
• obtain a licence in each region where they plan to operate;
• make regular tax payments (e.g., in New York, the rate is 51% of GGR).

Potentially, CFTC-certified prognosis markets can function nationally. This peculiarity opens access to a broad audience, including residents of provinces where wagering solutions are officially prohibited.

Mr Cherniak noted that bookmakers have an excellent opportunity to apply their experience, technology, and customer bases far beyond their traditional deployments. He believes that in the future, such practices will become truly national and even partially regulated.

Gaining Strategic Superiority

The initial reaction of betting giants to prediction platforms was rather negative. Nevertheless, niche brands quickly recognised the potential of a new segment and began actively pursuing it.

A striking example is the partnership between FanDuel and CME Group. The collaboration was initiated in a targeted and neutral manner: with gold and oil futures contracts. This move was strategically calculated to communicate to the entire industry: the flagship companies remain leaders in the gaming sector across all its forms.

The decision also eliminates regulatory issues, but FanDuel has gained a unique advantage: it can now dictate its rules to the authorities. If legal norms in the wagering niche continue to tighten, the operator will take a different path and gain access to a wider audience at the federal level.

New Hybrid Realm: Market Share Distribution

International and local brands alike quickly recognised the potential of this vertical. Its representatives can be divided into 4 categories:

1. Gambling giants, such as FanDuel and DraftKings. These companies already have significant influence, with large loyal customer bases and well-established marketing strategies. Their key obstacle to global expansion is strict regulatory requirements.
2. Financial and exchange agencies, such as CME Group, Kalshi, and Robinhood. These enterprises have a robust infrastructure, trading experience, and e-commerce licences. To maximise its reach, this community lacks the audience of flagship gaming corporations and the entertainment component.
3. Decentralised platforms, such as Polymarket or Crypto.com. The portals supporting tokens have a loyal customer base. Currently, they face the most difficult time entering the mainstream financial sphere due to various legal barriers associated with digital assets.
4. Highly specialised projects, such as Profit, Novig, or Sporttrade. These websites were registered and built an operational infrastructure as exchanges from the very beginning. They have the appropriate permits, technology, and a deep understanding of the niche.

Mr Danzig believes that success will come to those who can best leverage advantages, including a wide audience reach and an advanced technological base. A series of new strategic partnerships and deals that combine these 2 potential prosperity factors is likely to hit the industry in the near future.

It is false to call the situation a global redistribution of power. This trend of collaboration indicates market expansion and the emergence of a new hybrid gambling niche.

Startups in the Innovative Sector: Prospects

Examples of brands like Profit, Sporttrade, and Novig have proven quite illustrative. These companies achieved success thanks to their long-standing presence, allowing such firms to wait for the wave of popularity.

All of these organisations started with the classic sportsbook business model, with mandatory permits in every state. The strategy did not meet expectations, so the startups switched to a different model, sweepstakes. The decision enabled them to stay competitive and financially sustainable for quite some time.

With the rise of prediction-focused trends, these studios ended up in a unique position: they had a ready-made infrastructure, well-coordinated teams, and an understanding of the exchange industry.

For new investors, entry into the niche may be limited: opportunities remain primarily with large enterprises with established strategic connections. For instance, the sphere may be of interest to market-making service providers.

The Main Things About Prognosis Platforms’ Potential

Let us list key insights related to the new vertical:

• The segment is in its initial stages of development, and it is too early to make long-term forecasts.
• The approach is fundamentally different from core gambling practices: RNG algorithms have been replaced by logical, structured principles of pricing and probabilistic forecasting.
• The world is witnessing the emergence of a global trend at the intersection of iGaming and fintech: preliminary assessments of its viability will be possible no sooner than 12–18 months from now.

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James Burton The Casino Market partner, the owner of the gambling establishments’ network

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