Bank of America has put a price tag on prediction markets: $1.1 trillion in annual US sports event contract volume at maturity, generating roughly $10 billion a year in platform fees. The estimate, published on 9 April, frames prediction markets as a structural competitor to traditional sportsbooks and places Kalshi, the federally regulated exchange, at the centre of the opportunity with an estimated 89% share of measured US volume.
The BofA thesis: a trillion-dollar market
The Bank of America report estimates that US sports-related event contract trading could reach $1.1 trillion in annual notional volume once the market matures. For 2026, the bank expects approximately $100 billion in actual contract activity, an eleven-fold increase still needed to reach the long-term projection. At an average fee of roughly 1%, that $1.1 trillion figure translates to $10 billion in annual revenue for prediction market platforms.
The numbers sent shockwaves through the listed sportsbook sector. DraftKings (NASDAQ: DKNG) fell 7% on the day, while Flutter Entertainment (NYSE: FLUT) dropped nearly 4%. Both stocks have lost more than half their value over the past twelve months, with prediction market competition cited as a contributing factor alongside state tax increases and guidance disappointments.
BofA’s analysts highlighted three structural advantages that prediction markets hold over traditional sportsbooks: federal regulation under the Commodity Futures Trading Commission (CFTC) that enables nationwide operation, accessibility for users aged 18 and over rather than the 21-plus threshold for licensed betting, and a current lack of state-level gaming taxes on event contracts.
Five years from experiment to $22 billion
Prediction markets existed for decades before their recent explosion. University-run projects like the Iowa Electronic Markets allowed small-scale political wagers from the 1980s. InTrade, the Dublin-based platform, attracted global traders before its 2013 closure. But the current era begins in 2021, when Kalshi became the first exchange to receive a CFTC licence for event contracts.
Kalshi’s trajectory since then has been extraordinary. Founded in 2018 by Tarek Mansour and Luana Lopes Lara, the company raised $300 million in a Series D at a $5 billion valuation in October 2025, then $1 billion in a Series E at $11 billion two months later. In March 2026, Coatue Management led another round exceeding $1 billion, valuing Kalshi at $22 billion.
Total funding stands at approximately $2.9 billion. Revenue has scaled accordingly: Sacra estimates Kalshi generated $260 million in 2025 revenue, up from $24 million in 2024, with a run rate now approaching $1.5 billion. Sports contracts account for roughly 80% of Kalshi’s volume, with the platform securing an NHL licensing deal in October 2025 for official data and in-broadcast advertising.
Kalshi has not announced IPO plans. Despite its valuation placing it in large-cap territory, the company has so far secured all its capital through private markets. That has not insulated it from regulatory friction: Arizona filed 20 criminal counts against the company in March 2026, accusing it of operating an illegal gambling business, while the Ninth Circuit cleared the path for a Nevada ban on its operations.
Polymarket, Kalshi’s crypto-native rival, took a different path to scale. Built on the Polygon blockchain and settling trades in USDC, Polymarket surged to global prominence during the 2024 US presidential election, where its markets correctly forecast the result ahead of most polls. Intercontinental Exchange (ICE), owner of the New York Stock Exchange, made a $2 billion strategic investment in October 2025 at an $8 billion valuation, then added another $600 million in March 2026. By early 2026, Polymarket’s implied secondary market valuation had risen to approximately $11.6 billion.
Polymarket signed Major League Baseball as its exclusive prediction market partner in March 2026 and partnered with Palantir and TWG AI to build surveillance systems for detecting market manipulation. Despite holding roughly 7% of US measured volume according to BofA, Polymarket remains the dominant global platform for non-sports event contracts.
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Both companies’ CEOs have backed 5(c) Capital, a $35 million venture fund targeting prediction market infrastructure startups, signalling confidence that the sector will develop its own ecosystem of market makers, data providers and index designers.
The incumbents strike back
Traditional sportsbooks have moved quickly to defend their positions. DraftKings launched its own prediction markets product, DraftKings Predictions, operating through Crypto.com’s CFTC-registered CDNA exchange. CEO Jason Robins called it “the most exciting new growth opportunity we have seen since PASPA was struck down in 2018” and has targeted “hundreds of millions in annual revenue” from the platform. DraftKings reported FY2025 revenue of $6.05 billion, up 27%, and achieved its first-ever full-year GAAP profit. Its 2026 guidance of $6.5 billion to $6.9 billion in revenue deliberately excludes any contribution from Predictions. The stock trades around $24, giving the company a market capitalisation of approximately $11.3 billion.
Flutter Entertainment responded through both of its exchange-heritage brands. FanDuel launched FanDuel Predicts in the US, with Flutter committing up to $300 million in investment. In the UK, Betfair, the world’s original betting exchange, began beta testing Betfair Predicts in April 2026 under its existing UK Gambling Commission licence. The product uses the Betfair Exchange’s existing liquidity engine but presents contracts as percentage probabilities rather than traditional fractional odds.
Betfair Tests Prediction Platform as UKGC Sets Out Licensing Position
Flutter reported FY2025 revenue of $16.4 billion but posted a net loss of $407 million, driven by a $556 million India impairment. The stock trades around $106, with a market capitalisation of approximately $19 billion.
Robinhood (NASDAQ: HOOD) has emerged as a prediction market distributor with reach that pure-play platforms cannot match. The brokerage integrates Kalshi-powered event contracts directly into its app for its tens of millions of users. Event contracts have become Robinhood’s fastest-growing business line, generating an estimated $300 million in annual revenue. In January 2026, Robinhood completed its acquisition of exchange MIAXdx through a joint venture with Susquehanna, and is building its own CFTC-licensed exchange infrastructure expected to begin operations in 2026. Robinhood’s stock trades at approximately $70, with a market capitalisation of roughly $63 billion.
Crypto.com launched its own prediction markets brand, OG.com, in February 2026 on its CFTC-registered CDNA exchange, with a per-contract fee of $0.02. BofA estimates Crypto.com holds approximately 4% of measured US prediction market volume.
The wider field
Coinbase (NASDAQ: COIN), the largest US crypto exchange with a market capitalisation of approximately $45 billion, is building its own CFTC-licensed exchange infrastructure, expected to be operational in 2026. The move would allow Coinbase to disintermediate Kalshi and capture the full revenue stack from order matching to clearing.
Matchbook became the first operator to launch a dedicated prediction market product in the UK in January 2026, operating under its existing Gambling Commission exchange licence. The platform, branded Matchbook Predictions, presents contracts as Yes/No probabilities and is powered by the same exchange engine that has operated for nearly two decades. Matchbook has also launched a white-label prediction market for easyBet, part of easyJet founder Stelios Haji-Ioannou’s group. Its US partner, RSBIX LLC, filed a CFTC exchange application in September 2025.
Fanatics launched its prediction markets platform across 10 US states in December 2025. Interactive Brokers, Plus500 and WeBull have all introduced prediction market products. ADI Predictstreet, a blockchain-based platform backed by Abu Dhabi’s IHC, signed a multi-year agreement with FIFA as the official prediction market partner for the 2026 World Cup.
The sector has also organised politically. Kalshi, Crypto.com, Coinbase, Robinhood and Underdog formed the Coalition for Prediction Markets (CPM) to lobby for federal oversight and push back against state-level restrictions.
Prediction market companies by valuation
| Company | Type | Valuation / Market Cap (USD) | Source |
|---|---|---|---|
| Robinhood (HOOD) | Public (NASDAQ) | ~$63bn | Stock exchange, April 2026 |
| Coinbase (COIN) | Public (NASDAQ) | ~$45bn | Stock exchange, April 2026 |
| Kalshi | Private | $22bn | March 2026 funding round (Coatue) |
| Flutter / FanDuel (FLUT) | Public (NYSE) | ~$19bn | Stock exchange, April 2026 |
| DraftKings (DKNG) | Public (NASDAQ) | ~$11.3bn | Stock exchange, April 2026 |
| Polymarket | Private | $9bn ($11.6bn secondary) | ICE investment Oct 2025; PM Insights Jan 2026 |
| Crypto.com / OG.com | Private | Not disclosed | N/A |
| Matchbook (Triplebet) | Private | Not disclosed | N/A |
| ADI Predictstreet | Private | Not disclosed | Subsidiary of IHC (ADX-listed) |
| Fanatics | Private | ~$17bn | Last reported funding round |
State-by-state: where prediction markets stand in the US
Prediction markets operate under federal CFTC oversight, which in principle allows platforms like Kalshi to offer event contracts nationwide. In practice, at least 11 states have issued cease-and-desist orders against prediction market operators, and litigation is active in more than a dozen jurisdictions. Federal courts have delivered conflicting rulings, creating a patchwork that the Supreme Court may ultimately need to resolve.
The Third Circuit’s 7 April ruling in the New Jersey case was the first federal appeals court decision on prediction markets. It sided with Kalshi, holding that the Commodity Exchange Act grants the CFTC exclusive jurisdiction and pre-empts state gambling laws. But the Ninth Circuit has moved in the opposite direction, allowing Nevada to maintain its ban. The Fourth Circuit is scheduled to hear the Maryland case in May 2026. If it rules against Kalshi, the resulting circuit split would create the conditions for Supreme Court intervention.
At the state level, approaches range from active litigation and criminal charges to legislative proposals for taxation or outright bans. Utah’s governor signed legislation adding prediction market-style prop bets to the state’s list of banned gambling activities. California’s governor issued an executive order banning state officials from using insider knowledge on prediction markets. Arizona filed 20 criminal misdemeanor counts against Kalshi. Meanwhile, states without legal sports betting, including California and Texas, have become major markets for prediction platforms precisely because no licensed sportsbooks operate there.
The table below summarises the regulatory status of prediction markets across all 50 US states and the District of Columbia as of April 2026. “Accessible” means platforms operate under federal CFTC authority with no documented state enforcement action. This status is fluid: states may initiate enforcement at any time, and several “accessible” states have attorneys general who joined a 39-state coalition urging federal courts to uphold state authority over sports gambling.
| State | Status | Notes |
|---|---|---|
| Alabama | Accessible | No documented state action |
| Alaska | Accessible | No documented state action |
| Arizona | Criminal charges / CFTC lawsuit | 20 criminal counts filed against Kalshi (March 2026); CFTC sued the state (April 2026) |
| Arkansas | Accessible | No documented state action |
| California | Accessible (executive order) | No platform ban; Governor Newsom issued executive order barring state officials from insider trading on prediction markets |
| Colorado | Accessible | No documented state action |
| Connecticut | Cease-and-desist / CFTC lawsuit | State issued cease-and-desist; CFTC sued the state (April 2026) |
| Delaware | Accessible | No documented state action; Third Circuit ruling (NJ case) applies |
| Florida | Accessible | No documented state action |
| Georgia | Accessible | No documented state action |
| Hawaii | Legislation pending | State bill advancing to restrict or regulate prediction markets |
| Idaho | Accessible | No documented state action |
| Illinois | Cease-and-desist / CFTC lawsuit | State issued cease-and-desist; CFTC sued the state (April 2026) |
| Indiana | Accessible | No documented state action |
| Iowa | Accessible | No documented state action |
| Kansas | Accessible | No documented state action |
| Kentucky | Legislation pending | State bill advancing to regulate prediction markets |
| Louisiana | Accessible | No documented state action |
| Maine | Accessible | No documented state action |
| Maryland | Court ruled against Kalshi | Federal court denied Kalshi’s injunction (August 2025); state authority upheld; Fourth Circuit appeal pending (May 2026) |
| Massachusetts | Preliminary injunction against Kalshi | State court banned Kalshi sports contracts (January 2026); geofencing required; appeal pending |
| Michigan | Accessible | No documented state action |
| Minnesota | Accessible | No documented state action |
| Mississippi | Accessible | No documented state action |
| Missouri | Accessible | No documented state action |
| Montana | Accessible | No documented state action |
| Nebraska | Accessible | No documented state action |
| Nevada | Banned (temporary restraining order) | State court blocked Kalshi sports/election/entertainment contracts (March 2026); Ninth Circuit allowed Nevada ban; Coinbase also enjoined |
| New Hampshire | Accessible | No documented state action |
| New Jersey | Kalshi won (Third Circuit) | Third Circuit ruled state cannot enforce gambling laws against Kalshi (April 2026); state may seek en banc rehearing |
| New Mexico | Accessible | No documented state action |
| New York | Litigation pending | State enforcement paused by federal court; class action fraud suit filed (November 2025) |
| North Carolina | Accessible | No documented state action |
| North Dakota | Accessible | No documented state action |
| Ohio | Court ruled against Kalshi | Federal judge ruled Kalshi products are gambling (March 2026); referred to Ohio Casino Control Commission; Kalshi appealing |
| Oklahoma | Accessible | No documented state action |
| Oregon | Accessible | No documented state action |
| Pennsylvania | Accessible | No documented state action; Third Circuit ruling (NJ case) applies |
| Rhode Island | Accessible | No documented state action |
| South Carolina | Accessible | No documented state action |
| South Dakota | Accessible | No documented state action |
| Tennessee | Kalshi won (TRO granted) | Federal court blocked state enforcement (January 2026) after cease-and-desist |
| Texas | Accessible | No documented state action; major market for platforms due to no legal sports betting |
| Utah | Legislation enacted | Governor signed bill adding prediction market prop bets to banned gambling list; Kalshi sued the state pre-signing |
| Vermont | Accessible | No documented state action |
| Virginia | Accessible | No documented state action |
| Washington | State lawsuit filed | Attorney General sued Kalshi (March 2026) alleging violation of state gambling laws; Kalshi moved to federal court |
| West Virginia | Accessible | No documented state action |
| Wisconsin | Accessible | No documented state action |
| Wyoming | Accessible | No documented state action |
| District of Columbia | Accessible | No documented action |
The picture is shifting fast. A bipartisan coalition of 39 state attorneys general has filed an amicus brief urging federal courts to uphold state authority over sports gambling. At the federal level, Senators John Curtis (R-Utah) and Adam Schiff (D-California) introduced “The Prediction Markets Are Gambling Act” in March 2026, which would amend federal law to prevent CFTC-regulated platforms from offering sports and casino-style event contracts. More than 10 bills related to prediction markets have been introduced in Congress this year.
The American Gaming Association estimates that prediction markets are costing states more than $600 million annually in lost sports betting tax revenue. That figure is likely to grow. Until the courts or Congress settle the question, prediction markets will continue to operate in a legal grey zone where federal authority and state gambling law directly conflict.
The regulatory fault line
The legal architecture of US prediction markets is being built in courtrooms. On 2 April, the CFTC filed lawsuits against Arizona, Connecticut and Illinois, arguing that federal law pre-empts state gambling regulations as applied to CFTC-regulated event contracts. The agency is seeking permanent injunctions to prevent states from using gambling laws to interfere with federally regulated prediction market activity.
The state-level pushback has been aggressive. Nevada secured a ban on Kalshi operations through the Ninth Circuit. Massachusetts obtained a preliminary injunction. New Jersey lost an appeal that limits its ability to enforce gambling laws against the platform. At the federal level, a bipartisan group of senators has introduced legislation that would prohibit prediction market platforms from offering sports event contracts entirely.
Massachusetts Attorney General Files Lawsuit Against Kalshi Over Illegal Sports Betting
At the core of the dispute is a classification question: are event contracts financial instruments or gambling products? The CFTC has drawn a line between sports betting, which it views as entertainment, and event contracts, which it classifies as derivatives for hedging risk. States and incumbent sportsbooks disagree. The outcome could reach the Supreme Court by 2027, but a definitive ruling may take longer. In the interim, the sector operates under a patchwork of injunctions, enforcement actions and conflicting judicial outcomes.
The financial stakes are clear. Prediction markets currently avoid state gaming taxes, giving platforms a margin advantage that listed sportsbook operators have flagged as a competitive distortion. BofA’s report noted that the tax asymmetry, combined with the 18-plus age threshold and nationwide access, gives prediction markets structural advantages that sportsbooks cannot easily replicate within existing state licensing frameworks.
Europe a different playbook
Where the US debate centres on whether federal or state law controls, Europe has moved faster toward a simpler answer: prediction markets are gambling, and unlicensed platforms are illegal.
Gibraltar became the first European jurisdiction to formally license a prediction market operator on 26 March, issuing a licence to Predict Street Ltd under the 2005 Gambling Act. The platform, which is the official prediction market partner of the 2026 FIFA World Cup, is powered by ADI Chain’s blockchain infrastructure. Minister for Justice Nigel Feetham framed the move as part of Gibraltar’s effort to diversify its regulatory offering following the UK’s Remote Gaming Duty increase to 40%.
Malta is actively exploring a dedicated regulatory framework for prediction markets, with Economy Minister Silvio Schembri stating in March 2026 that the government is studying how to govern the sector “responsibly and at scale.” No licence has been issued yet, but Malta would become the first EU member state to establish purpose-built rules if it proceeds.
The UK occupies a middle ground. The Gambling Commission has stated that prediction markets fall under its remit as betting exchanges, requiring a UKGC licence. Matchbook launched under that framework in January 2026, and Betfair Predicts is testing under the same regulatory structure. The Financial Conduct Authority (FCA) oversees financial spread betting separately and maintains a retail ban on binary options, which share structural similarities with event contracts. Robinhood has held discussions with the FCA about launching prediction markets in Britain.
Across the rest of Europe, the picture is considerably more hostile. A Romanian court upheld Polymarket’s ban in April 2026, rejecting the platform’s appeal against its blacklisting by the National Office for Gambling (ONJN). The Dutch KSA ordered Polymarket to cease operations in February, threatening fines of approximately $500,000 per week. France’s ANJ reiterated that prediction markets are illegal under French law, drawing explicit parallels with cryptocurrency trading. Belgium, Germany, Greece, Poland, Portugal, Switzerland, Cyprus and Ukraine have all blocked or banned major prediction market platforms.
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Denmark presents an exception: the Danish Gambling Authority (DGA) cannot block platforms like Polymarket and Kalshi unless there is evidence they are specifically targeting the Danish market through local payment methods or currency.
At the EU level, ESMA’s 2018 ban on binary options for retail investors remains in force, and event contracts share structural similarities with binary options. MiCA implementation in 2026 adds a further layer of complexity for crypto-settled prediction markets. An Oxford Law Blog analysis published in March 2026 called for a formal “prediction test” to determine regulatory classification across European jurisdictions.
What comes next
The 2026 FIFA World Cup, hosted across the US, Canada and Mexico from June, will serve as the first mass-market stress test for prediction markets as a mainstream product. ADI Predictstreet holds the official FIFA partnership. Kalshi and Polymarket will both target the event. DraftKings, FanDuel and the other sportsbook entrants will be competing directly for the same audience.
BofA’s $1.1 trillion figure has become the benchmark number cited in every policy argument, whether for or against the sector. Listed sportsbook operators have collectively lost more than $30 billion in market capitalisation over the past year. The CFTC is suing states. States are suing platforms. Congress is debating outright bans. Europe is blocking and licensing in equal measure.
For the iGaming industry’s largest operators, prediction markets represent both a competitive threat and an expansion opportunity. Whether the sector consolidates under a single federal framework or fragments into a jurisdiction-by-jurisdiction regime will determine not just the trajectory of Kalshi and Polymarket, but the economics of the entire sports wagering market for the next decade.
The iGaming Europe Editorial
Source used: Bank of America, CoinDesk, Bloomberg
