The questions investors operators, and journalists ask us most. Answered plainly, with sources where they exist.
A prediction market is a peer-to-peer exchange where users trade binary contracts on real-world outcomes. Each contract pays $1 if the specified event occurs and $0 if it does not. The market price between $0 and $1 represents the crowd's implied probability.
No. A sportsbook is a dealer that takes the opposite side of every wager and earns a spread. A prediction market is an exchange that matches users with each other and earns a flat fee. The economic structure, margin profile, and regulatory perimeter are all different.
According to NEXT.io's March 2026 report, monthly trading volume across major prediction-market platforms grew from less than $100m in early 2024 to more than $13bn in December 2025.
Functionally they resemble gambling. Legally, the answer depends on jurisdiction and contract type. In the US, the CFTC treats listed event contracts as derivatives; several state gambling regulators argue that sports event contracts are gambling under state law. The dispute is unresolved.
Polymarket settled with the CFTC in 2022 and geofenced US users. In 2025, a US-facing affiliate launched under a CFTC-registered structure. Polymarket's primary venue remains non-US.
Kalshi is a CFTC-registered Designated Contract Market and argues federal preemption gives it nationwide reach. Several state gambling regulators dispute this and have issued cease-and-desist letters over sports contracts. Litigation is ongoing; legality of sports contracts in any given state depends on the most recent court action.
Depends on the channel, the jurisdiction, and the partner's compliance posture. State-level restrictions on gambling advertising apply where the contract is treated as gambling. Geo-compliance and partner-approved creative are mandatory.
The legal doctrine that federal law overrides conflicting state law. Kalshi argues CFTC registration preempts state gambling law over its event contracts. The Supreme Court has not yet ruled on the question.
Polymarket settles in USDC on Polygon, dominates politics and culture markets, and operates primarily offshore. Kalshi is a CFTC-registered US venue settling in USD, with aggressive expansion into sports event contracts. Both are exchange-structured; the regulatory and settlement layers differ.
Exchanges earn a take rate — typically 1–4% — on each trade. They do not hold inventory in the contracts themselves, so revenue is volume-driven rather than outcome-driven.
Closer to exchange comparables (CME, ICE, Nasdaq) than to sportsbook comparables (DraftKings, Flutter). Exchanges trade at 6–12x EV/Revenue; sportsbooks at 2–4x. Anchoring a prediction-market venue to a sportsbook multiple is a common analytical error.
An adverse Supreme Court ruling that confirms state authority over sports event contracts and constrains federal preemption. Most other risks can be mitigated through diversification.
Affiliate-media properties carry lower regulatory risk (the cease-and-desist letters go to platforms, not their referrers), have lower capital intensity, and can monetise multiple venues across multiple jurisdictions. We expand on this in our investment thesis.
Currently materially lower than sportsbook affiliate CAC, because the category has been growth-driven by earned media and organic search rather than scorched-earth bonus marketing. This gap will compress over time as competition intensifies.
CPA pays a flat one-time commission per qualifying customer. Revenue share pays an ongoing percentage of the venue's revenue from referred users. Most experienced operators negotiate hybrid structures.