As it relates to the “cousin-like” relationship between the sports betting market rise from 2018 to 2023, and the rocket ship that prediction markets are currently on, you could say we may be living in a parallel universe.
Ask any industry executive, reporter, analyst, or marketer, and they’ll tell you they have deja vu. Both industries were born the same way. Pent-up consumer demand walked straight into a brand new, wide-open financial market. Sports betting had the Supreme Court's 2018 repeal of the Professional and Amateur Sports Protection Act. Prediction markets have the accelerating rise of the event contract as a federally regulated way to trade on outcomes. In both cases, capital rushed in behind the demand and volume took off almost overnight.
The numbers make the parallel impossible to ignore. At Super Bowl LX in February, Kalshi's volume tied to the game jumped from $27 million the year before to more than $500 million, while the American Gaming Association's legal sportsbook handle hit a record $1.76 billion. Five months later for the World Cup, the gap nearly closed. Kalshi alone processed more than $31 billion in trading volume during the World Cup in June, and combined with Polymarket, the two platforms transferred nearly $44.8 billion that month. The entire U.S. legal sportsbook handle for the same stretch was only $3 to $4 billion. H2 Gambling Capital measured prediction markets growing from 9% of legal U.S. sports betting volume at the start of the year to 27% during the tournament.
The prediction market’s hockey stick growth curve feels nearly the same this time around. There is no denying the similarities between the kickstart of these markets, however, this current inflection point is where the stories could deviate entirely.
Wild West of Duopolies
Every open market goes through the same early phase. Call it the cliche “Wild West” phase of huge consumer buzz, massive investor interest, and every entrepreneur and tech guru thinking they have the best solution. The interesting parallel between both timelines lies in the fact that both markets opened in a duopoly: sports betting with DraftKings and FanDuel and predictions with Kalshi and Polymarket.
Where the Playbooks Diverge: Regulation
Here is the first real difference, and it is a significant one. Sports betting's land grab unfolded while all fifty states worked through their own legalization process. It was a moving target, but it had a clear destination: a fully regulated, state licensed market. Prediction markets are growing inside a fight that has not been resolved at all. The Commodity Futures Trading Commission, or CFTC, claims exclusive federal jurisdiction over event contracts as regulated derivatives. A coalition of 44 state attorneys general sent the CFTC a letter in July arguing the opposite, that sports related event contracts are gambling products subject to state law. The CFTC has sued Arizona, Connecticut, Illinois, and New York to defend its jurisdiction. States have sued the platforms directly. Arizona went as far as filing criminal charges against Kalshi. Novig was hit with lawsuits from five states within weeks of its national launch. Courts are split on the underlying question, and prediction market traders are currently pricing in a real chance the Supreme Court takes up a case before the year is out. Sports betting never had to litigate its own legality while trying to scale. Prediction markets are doing both at once, and that alone could determine how fast this category consolidates and who is even still standing to consolidate it.
M&A Is Already Underway, But Will Consolidation Bring Innovation?
Sports betting's early years produced plenty of strategic acquisitions.
DraftKings paid $1.6 billion for Golden Nugget Online Gaming and $750 million for Jackpocket. Flutter spent billions consolidating full ownership of FanDuel and expanding into Italy and Brazil. But the sheer volume of dealmaking never reached what industry analysts projected in 2021 and 2022, when the expectation was an all-out arms race for market share, user experience, and technology. DraftKings walked away from a $22 billion bid for Entain. Flutter chose to spend its biggest checks buying out its own minority stakeholders rather than acquiring challengers. The appetite for major consolidation cooled well before it reached the scale the market expected.
Prediction markets have already started the M&A machine. On July 30, 2026, IG Group agreed to acquire Underdog, to create the third-largest U.S. prediction markets exchange by volume, for up to $1.3 billion.
This is the part of the pattern that matters most. Whatever M&A did happen in sports betting never changed the daily experience of placing a bet. Open the DraftKings or FanDuel app today, and you are largely looking at the same product you were looking at three or four years ago. Same-game parlays, odds boards, incremental UX refinements, but not the leap forward that was promised when the capital and attention were at their peak. The dealmaking bought market share and adjacent verticals. It did not buy a better fan experience.
This is where the market stayed stagnant. What is the main differentiator between the top sportsbooks on the market? Maybe the look of the logos? The experience between brands and experience ran together, a ubiquitous melding.
At this point, it remains to be seen if the prediction markets will follow the same pattern as the sports betting market or see the M&A market as an opportunity to innovate, differentiate themselves through user experience, or build a truly unique brand presence.
The Duopoly Is Not Holding the Same Way This Time
Sports betting's second tier never made a dent. Barstool Sportsbook launched in 2020 and never broke 3% of national handle. It was rebranded ESPN Bet in 2023 under a $2 billion, ten-year licensing deal built on a target of 20% market share by 2027. It floundered at 2.35%, and the deal was terminated early. WynnBet, TheScore, Fubo Sportsbook, MaximBet, Fox Bet, Betway, Unibet, to name a few, all launched and all have ceased operations. DraftKings and FanDuel still sit at one and two, years later, essentially unchallenged.
Prediction markets are not following that pattern so far. Novig launched nationwide on August 4, 2026, and did more than $125 million in trading volume in its first week alone, a figure that topped the opening week numbers Kalshi, Polymarket US, Underdog, and DraftKings' own exchange each posted at their respective launches. That instantly made Novig the fourth largest regulated prediction market operator in the country. Robinhood's Rothera has climbed past Crypto.com for third place in notional volume. Underdog was significant enough to draw a $1.3 billion acquisition. This is a far more contested field than sports betting ever faced from its second tier, and it raises a real possibility that a clean duopoly does not hold here the way it did for DraftKings and FanDuel.
The parallels between both industries are clear. For the sports betting markets, it might be too late to regain the market share lost from the prediction markets. However, if the prediction markets are going to continue to march forward with this ferocity, the early competition in the market is showing that the duopoly can’t use their size to just outlast their rivals. Learning from the past of the sports betting market, the time is now for the prediction markets to understand they must invest in creating market separation through technology, user experiences or brand to hold or grow their market share. We’re about to witness if the prediction markets will learn this lesson or just become the next chapter of this parallel universe.
