If you’re looking to find out the key differences between prediction markets and sportsbooks, our InGame prediction market vs. sportsbook guide explains everything you need to know.
From regulatory structures to making trades instead of bets, prediction markets distinguish themselves in quite a few ways from what one might expect at a traditional sportsbook.
As an avid fan of both types of apps, one might prefer the simple contract price structure of prediction markets but still prefer the wager-type options that sportsbooks offer.
Or, you might want to join a prediction market app to predict non-sports events instead of being limited to sports-only selections.
If you’re in the United States and are at least 18 years of age, you can most likely join a popular prediction market app within just a few minutes, provided you are located in a legal state.
Read on to learn the details related to prediction markets versus sportsbooks.
How prediction markets work
Prediction markets work through online sites and apps that allow customers to make real money trades on their predictions by buying and selling event contracts.
While sportsbooks are limited to sports-related events, prediction markets can span a larger range of predictions, including political elections and global affairs outcomes.
The sign up process to participate in prediction markets typically requires a new account with an online brokerage (like Robinhood or IBKR) that can facilitate the trades each customer makes.
Prediction market contracts are priced between $0.02 and $0.98 for the most part, with each winning contract (or selection) paying out exactly one dollar.
This means that longshots are represented by lower contract prices while favorites are reflected in higher contract prices.
For more on prediction markets, check out our Prediction Markets Explained page.
Prediction market liquidity
Prediction market liquidity is an essential part of a properly functioning market. Prediction markets require player liquidity, as each trade must be transacted with a counterparty. Liquidity means that there are many buyers and sellers trading in the market and the price doesn’t move much with each individual trade.
For sportsbook apps, players place their wagers at a price that’s set specifically by the “house.” There is no counterparty so liquidity is not an issue.
But prediction markets are all about real time valuations that other traders on the prediction market app set for each event contract.
For this reason, your best bet (if you want to have a wide selection of events and prediction types to choose from) is to join a prediction market app that has a lot of other traders on it.
Apps like Kalshi and Polymarket, which currently operate in just about every state, enjoy widespread popularity and availability. This makes them ideal for traders because most markets are liquid and have significant trading volume.
Prediction market fees
Prediction market fees are structured differently from sportsbook wagers.
For sportsbook bets, an even-odds wager will typically have the fee baked in by offering a -110 line. Players pay $110 to win $100. The fees are included in the vig charged by the sportsbook.
An even-odds prediction, on the other hand, would be priced at exactly 50 cents per contract – plus a per contract or total commission percentage charged on top of the trade amount.
If a player buys 230 contracts at 50 cents apiece, the total win amount (if successful) is $115 since each winning contract pays out $1.
However, if there is a $0.02 per-contract commission charged, then the total cost of those contracts would be $119.60 ($115 + $4.60). If there is a 6% commission on the total trade amount, the 230 contracts would cost a total of $121.90 ($115 + $6.90).
Pricing for prediction market trades tend to be lower than traditional sportsbook bets, unless your predictions revolve around making a lot of “underdog” predictions tied to per-contract fees.
At a sportsbook, a true 49:1 longshot might be priced at +4300 to allow the company to make money.
Using this example, a $1 wager would pay out $43 on winning selections.
However, a prediction market app that charges a $0.01 per-contract fee would price each contract at $0.02 each (with the $0.01 fee to be paid on top of that).
Therefore, you would only be able to purchase approximately 33 contracts for the 49-to-1 underdog prediction, with an expected return of only $33 (represented by a one dollar payout on each contract) if your prediction is correct.
How sportsbooks differ from prediction markets
Sportsbooks only offer bets on sports events. The best sportsbooks offer dozens of sports for players to bet on while also offering wagering types from moneylines and point spreads to totals and parlays.
In the past, the main focus of prediction markets was non-sports markets, but the rise of sports event contracts has led sports contracts to generate close to 90% of the overall trading volume at the top prediction market operators.
The “best” prediction markets have huge player liquidity, which results in sufficient player interest in a wide assortment of events and prediction types.
Prediction market “combos” are a new parlay-style concept that only a few apps offer at this time, but will become more popular on apps that have enough player liquidity to support them.
Sportsbooks differ from prediction markets in the way they “frame” wagers and predictions, too.
Sportsbooks allow players to wager on outcomes by using “minus” lines for favorites and “plus” lines for underdogs.
They only consider the odds that they publish at the exact time a bet is made. The bet can’t be exchanged with other bettors before or during an event, and can only be “cashed out” directly with the sportsbook app using special, proprietary promotions.
Prediction market contracts remain “live” before and during an event. Prices can fluctuate in real time and the contracts themselves can be bought and sold up until the time that the event concludes – even if the “odds” have changed significantly.
The important thing to remember is that you’ll need another trader who is willing to buy or trade an existing prediction at the same price you’re offering in order for the trade to go through.
Pros and cons of prediction markets
Prediction markets offer their own unique set of pros and cons for players.
Prediction Market Pros
- Simple $1 per-contract payout on all winning trades
- Lower pricing unless you’re paying per-contract fees on a significant underdog prediction
- Predict the outcomes of political elections, global affairs, financial market performance, and more
- Federally regulated by the CFTC
- You can buy and sell contracts as their prices evolve up until the event concludes
- Making a profit and profiting isn’t frowned upon by the platform since you’re trading with other users
Prediction Market Cons
- Casual players who don’t research their prediction can lose in the long run
- Some prediction market apps offer a limited number of sports events (or none at all)
- Requires a large base of users in order to have liquid markets
Pros and cons of sportsbooks
Likewise, there are several reasons why players might prefer sportsbooks or choose to play on prediction market apps only.
Sportsbook Pros
- Casual players can make wagers without having to haggle with other users
- Most sportsbooks offer thousands of markets and many different wager types
- Sportsbooks aren’t reliant on liquidity
- Sportsbooks offer live wagering throughout the duration of many events
- Price is locked in after your wager is made
Sportsbook Cons
- Higher prices when compared to prediction market apps
- Most of the time you can’t sell your bets and must wait until the event has concluded to determine winners
- Sports betting still hasn’t been legalized in 11 states
Regulation and legal status
Sportsbook apps are regulated by state, and are available in more than two-thirds of the country.
Most state-regulated sportsbook apps have a minimum age requirement of 21. The player must be in the specific state at all times when placing wagers.
Prediction market apps like Kalshi and Polymarket have large player bases due to their availability in just about every US jurisdiction.
However, their claims of federal regulation by the CFTC are currently being challenged by numerous states, which could eventually result in prediction apps having less player liquidity if they start getting blocked.
The minimum age to trade on most prediction market apps is 18.
Apps like DraftKings Predictions and Fanatics Markets have acquiesced to state regulation, but do not offer integrated sportsbooks. In other words, you’ll need to create a new account and username to play on those apps.
Biggest prediction market apps
The biggest prediction market apps are currently available in all or most US states.
KALSHI
Kalshi accounts for more than half of all prediction market activity, with roughly $1 billion in total weekly trades. It is by far the most popular prediction market app that’s currently available, and offers plenty of research and tracking tools for “sharp” players.
POLYMARKET
Polymarket has also experienced significant growth in recent months and is now ranked as the third largest prediction market app on the internet.
ROBINHOOD
Robinhood is another prediction market app that has gained popularity in the US. It offers very limited sports (NFL outcomes only), but makes up for that by allowing players to access their Kalshi trades on the platform.
CRYPTO.COM
This prediction market platform now has over 100 million users. It facilitates crypto-based transfers for both deposits and withdrawals of winnings.
PREDICTIT
PredictIt markets itself as an instructional tool and has recently re-launched its services with higher limits.
Choosing between prediction markets and sportsbook apps
If you’re located in a state where mobile sports betting has yet to be legalized, then you’ll want to join a prediction market app that offers sports-related trades.
If both are available in your state, then the main difference will be whether you want to compete against “the house” or other players who use the prediction market platform.
Casual players should probably stick to traditional sportsbook apps if they’re only interested in sports betting, but admittedly, there is a certain “lure” to predicting non-sports events.
Keep an eye on per-contract fees if you’re selecting a lot of long-shot predictions, as the commission can add up very quickly.
Finally, if you’re between the ages of 18 and 20, your only choice will be prediction market apps, as regulated sportsbook apps usually have a minimum age requirement of 21.
Conclusion
If you’re someone who enjoys wheeling and dealing with competing players while testing your aptitude on global affairs and financial market outcomes, then prediction market apps are perfect for you.
On the other hand, if you prefer a more intimate experience with the ability to view or stream sports events in real time while your wager is still pending, choose sportsbook apps.
Either way, sportsbooks and prediction markets can be a lot of fun and a great destination for your weekly or monthly personal entertainment budget.
