Prediction markets are emerging as competitors to traditional betting sites in the US. If you’re new to them, it’s natural to ask what’s the difference between prediction markets vs sportsbooks. We’ll provide the answers in this guide.
For starters, both prediction markets and regular sportsbooks involve backing outcomes on sports games and other events.
However, the former is more like trading, while the latter involves staking on fixed odds.
This setup affects their regulations, margins, and payouts. They’re actually very different to each other. Keep reading to learn more about the variances, and in the end, you can decide which is suitable for you.
Most prediction market sites are online trading hubs. On these platforms, you buy or sell sports event contracts based on projected outcomes. Importantly, the sites don’t set the contract price, and it’s entirely based on market activity.
If you see an event contract priced at $0.5, it means 50% of traders believe the outcome will happen. The contracts follow a Yes/No pattern, and you pick Yes in favour or No against.
Take an NFL game for the 49ers vs the Panthers. If you buy a Yes contract for the 49ers to win, you’re automatically picking No on the Panthers, and vice versa.
From our reviews, two popular prediction market platforms in the US are Kalshi and Polymarket. You can check out our guide on Kalshi vs Polymarket – Which App is Better to learn more about how they work.
So, prediction markets vs sportsbooks, what’s the difference? We’ve highlighted five main areas where the two vary below:
Online sportsbooks operate under local licensing in states where they’re legal. For instance, a sportsbook site in NY must be regulated by the New York State Gaming Commission (NYSGC). In states where online sports betting isn’t legal, the platforms can’t operate at all.
In contrast, prediction market hubs usually don’t have local licenses. Since they’re trading platforms, they operate under regulatory oversight by the Commodity Futures Trading Commission (CFTC) at the federal level. That said, it’s still important to check your regional laws to know if you can use a prediction market app.
Both prediction market sites and sportsbooks list traditional sports like football, basketball, hockey, and baseball. As such, you’ll see the NFL, NCAA, NBA, NHL, MLB, and other leagues. However, sportsbooks have more coverage overall. We often see 20+ sports at online betting sites and fewer than 10 for prediction market platforms.
Also, sportsbooks list more markets for betting. In our guide on what is event trading, we explained that prediction market sites mainly feature moneylines, spreads, totals, and futures. They focus on team results, and you’ll rarely see props like at standard sportsbooks.
At an online sportsbook, you’re betting on fixed odds set by the site. Here is an example:
| +120 | This means you’ll win $120 for a correct $100 bet |
| -120 | This means with a $120 bet, you can win $100 |
With prediction market sites, there are no fixed odds. You purchase sports event contracts instead, and the cost can rise and fall based on market activity. Hence, liquidity matters.
If the number of traders is low, a few buys or sells can significantly affect the contract cost. Also, the rate may not always reflect the actual probability due to bias. You can learn how to read market prices as probabilities to make better speculations.
Note that the price of each event contract is always between $0.01 and $0.99. However, you can buy many at a time. For instance, if the cost is $0.20, you can purchase 1,000 event contracts for $200.
We’ve mentioned how online sportsbooks have fixed odds with straightforward payouts. A winning $100 bet on a +120 odds will return $220 in total. You can combine multiple sports games in parlays and receive higher potential payouts based on the total odds.
Prediction market sites don’t work the same way. Each event contract settles independently, and the return is always $1 if the outcome is correct. Otherwise, you get $0. Your potential profit is the difference between $1 and the cost of the contract.
Let’s say you purchase 50 sports event contracts at $0.45 each. That means you spent $22.50. Since the total possible return from all 50 contracts is $50, your potential profit is $27.50.
Sportsbooks feature fixed odds, and prediction market hubs use event contracts, but both have built-in margins for profit. It’s just collected differently. From our analysis, top US betting sites take less than a 5% vig on market lines. Therefore, you often get at least 95% potential payouts for winning bets.
With prediction markets, the margin is added to the contract price, and it’s usually $0.01. For example, a Yes contract for a team to win may be $0.75. You’d expect No to cost $0.25 since the fixed payout for each contract is $1. However, No will typically be listed at $0.26, adding a $0.01 margin.
If you purchase an event contract and decide to sell, you’ll also pay a spread. It’s the difference between the buy and sell price. So, if buy is $0.75 and sell is $0.73, you’re paying a $0.02 spread for each contract. The good thing is that there are no extra event trading fees on prediction market sites.
At this point, we’ve explained what the difference is between prediction markets vs sportsbooks. In our experience, there’s no outright best option. It depends on your preferences and location.
If traditional betting apps are not legal in your state, you can consider prediction market sites as alternatives.
However, sportsbooks take the lead for a wider range of betting options and payouts since they use fixed odds. Whichever you choose, check the banners on this page for reliable US sportsbooks or prediction market sites to join.
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