With sports contracts accounting for upward of 90% of the action on U.S.-regulated prediction markets, the fears of cannibalization from sports betting operators are very real. It is a driving factor in why so many of the online sportsbooks without a brick-and-mortar license to lose have wandered into the space.
Well, much like reports of Mark Twain’s death, cannibalization fears might also be exaggerated. At least that’s the takeaway from the newly released April Prediction Market Monitor from Eilers & Krejcik Gaming (EKG). According to its data, 69% of all sports contracts are originating in the 19 states where there is no legal online sports betting, with an eye-popping 43% of it coming from two states: California and Texas.
Clearly, based on this data, prediction markets aren’t so much cannibalizing existing sportsbooks as they are filling a void left in the wake of the states without legal online sports betting.
The void-filling thesis goes deeper than just the 19 states without legal sports betting. Even in mature, fully competitive online sports betting states, EKG pegged Kalshi’s share of the combined handle at about 2%. They’re calling that a “provisional ceiling” on substitution, which means the actual cannibalization number is probably even lower than that.
Why lower? Because prediction markets accept anyone 18 and up. For state-regulated sportsbooks, in the great majority of these states, you need to be 21. That alone accounts for a meaningful chunk of action that has no sportsbook equivalent, as the report notes. Those aren’t customers being poached. They’re customers who can’t legally sign up at FanDuel, DraftKings, and the rest.
So the prediction market picture is starting to come into focus. Kalshi and company are filling a void in the 19 states without legal online sports betting, picking up some 18-to-20-year-olds in the legal states, and generating a small but substantial slice of new demand on top of all that.
Not in the clear
Those conclusions about cannibalization, however, are not the same as saying the sportsbooks are safe.
Kalshi has gone from the No. 9 sports betting operator in the country to the No. 4 in the span of a year, at least on EKG’s adjusted handle-per-adult basis. It’s now running at roughly 22% of DraftKings’ output. And that’s before DraftKings and FanDuel have meaningfully turned on their own prediction market products, both of which are expected to ramp up later this year.
EKG projects U.S. sports prediction markets will hit $77 billion in volume this year and double that next year. The translated handle figure projects to about $34 billion for 2026. That’s roughly 20% of trailing-12-month OSB handle.
No, prediction markets aren’t gutting the sportsbooks. Not yet, anyway.
And let’s not forget there is big money at stake here. Imagine, for a moment, if Texas and California — the two most populous states in the country — legalized sports betting and taxed it like New York, the fourth most populous.
Break out the napkins and ballpoint pens.
In 2025, New York collected over $1.32 billion in taxes from the sportsbooks. There are about 20 million residents in the Empire State. California and Texas combined? About 71 million. Easy math yields the following number: Over $4.62 billion in potential taxes left on the table. Instead, those two states are getting the sum total of zero tax dollars from sports event contracts. In GDP alone, that $4.62 billion would make the nation of CaliTexasSportsBetting the 162nd largest economy in the world, right on the heels of Aruba.
A note on the numbers: Kalshi doesn’t release state-by-state volume data, so the 69% and 43% figures above are estimates from EKG. It built them by taking Kalshi’s national volume (which is public) and slicing it up using Google search trends, digital ad data, and its own competitive index, then weighting it all against each state’s adult population. EKG updates the model every quarter and calls it a “principled approximation” rather than a precise count.
