Retail traders fare worse on prediction markets than sportsbooks

A new report from Citizens JMP Securities indicates that retail users on prediction markets are experiencing significantly deeper financial losses than those participating in legal sports betting. The analysis, which examined transaction data from July 2025 through mid-March, found that the median return for prediction market users was -8%, starkly contrasting with the -5% median return for sports betting users over the same period.

Key Findings on Trading Performance

The report highlights a substantial disparity in outcomes based on trading volume. Individuals who traded more than $500,000 on prediction markets achieved a median Return on Investment (ROI) of +2.6%, aligning with benchmarks for experienced traders. However, every cohort trading less than this amount experienced negative returns, with users trading under $100 seeing a median ROI of -26.8%. While no cohort in legal sports betting was profitable, the losses were less severe, with the largest sports betting accounts showing a -0.6% ROI and the smallest accounts at -29.3%.

Structural Differences Between Markets

A key differentiator identified is the nature of the counterparties involved. Unlike regulated sportsbooks that limit or ban profitable users, prediction markets do not restrict successful traders. This concentration of informed participants means retail traders in prediction markets are directly exposed to professionals, market makers, and high-volume traders who consistently profit from less informed flow. This dynamic flips the traditional model where sportsbooks manage risk by filtering out winning players.

Prediction Markets vs. Online Gambling

Despite concerns, gaming industry executives have largely dismissed prediction markets as a significant threat to online gambling. CEOs from companies like DraftKings and Flutter stated that prediction markets are not materially impacting their existing customer base or causing significant cannibalization. BetMGM estimated only a low-to-mid-single-digit percentage impact. Citizens JMP's own estimate places the impact at around 5%.

However, the report points to a more significant concern: user acquisition. Prediction markets, such as Kalshi, are attracting a younger demographic. Approximately 24% of Kalshi users are under 25, with a median age of 31. This contrasts sharply with DraftKings and FanDuel, where only 7% of users are under 25 and the median age is closer to 35. Data indicates that roughly 90% of DraftKings' revenue comes from users over 30.

Furthermore, downloads for FanDuel and DraftKings saw year-over-year declines of 18% and 13% respectively from September 2025 to February 2026. In the same period, Kalshi recorded 6.3 million downloads. This suggests that prediction markets may be capturing the attention of the next generation of bettors before they engage with traditional online gambling platforms.