Bank of America Predicts $1.1T Sports Event Contract Boom on Prediction Markets

A new report from Bank of America has sent shockwaves through the sports betting industry by projecting that sports event contracts on prediction markets like Kalshi and Polymarket could reach an annual volume of $1.1 trillion. This staggering figure represents an eleven-fold increase from the estimated $100 billion expected this year and would generate $10 billion in annual revenue for operators at a 1% commission rate.

The report highlights how prediction markets are rapidly gaining traction, with nearly 80% of Kalshi‘s March volume coming from sports event contracts. While the platform also sees significant activity in cryptocurrency derivatives and cultural/political event contracts, sports remain its dominant focus.

Bank of America analysts Julie Hoover and Shaun Kelley note that Kalshi is rapidly integrating into daily life, offering always-on odds across finance, crypto, pop culture, and sports. The bank estimates Kalshi controls a dominant 90% of U.S. event contract activity, with Crypto.com trailing at just 4%. This dominance is partly due to Polymarket not yet being fully operational in the U.S.

The report explains why sharp bettors are increasingly shifting to prediction markets. ‘Sharp bettors are typically banned or limited on regulated sportsbooks for beating the house too frequently,’ the analysts explain. ‘For these bettors, who often wager much more than a casual customer, a prediction market could be much more attractive since they don’t get limited and can play the sportsbook house and market maker against casual bettors.’ Platforms like Kalshi further incentivize these high rollers by reducing or eliminating fees in exchange for liquidity.

The market projections have already had a tangible impact, with shares of DraftKings and Flutter Entertainment (which owns FanDuel) tumbling by 7.06% and 3.89% respectively, following the report’s release. Over the past year, both stocks have declined significantly—DraftKings by 38% and Flutter by 55.5%—as prediction markets continue to encroach on traditional sports betting territory.

Prediction markets hold several advantages over traditional sportsbooks, including federal regulation that currently allows yes/no exchanges to operate in states where sports betting isn’t legal. Additionally, they attract a younger demographic and face less clarity around taxation, giving them a competitive edge.