Predictive Markets

Predictive markets are the new kids on the block. Currently, the biggest names are Kalshi, Crypto.com, and Robinhood.

Operating Platforms

If you are in a state that bans sportsbooks, predictive markets may be for you. The platforms that offer prediction markets are structured like financial exchanges. Because they are structured this way, these platforms can operate across the United States and are taxed more like financial securities or futures and not gaming wages.

These platforms are also federally regulated.

The Similarities

Predictive markets are closer to prop bets that you would make with a sportsbook and even on some DFS platforms. These are bets that are contingent on a very specific outcome ( for instance, will Player X score higher than X amount of points). And while we know about the ability of manipulation involved when betting on one person (who has some control of the outcome) to do X or Y, in a predictive market, the ability to manipulate increases because the scope of what you can wager on is almost limitless.

The most recent example, non-sports-related, was when a US soldier used classified information to ‘predict’ that the United States would capture Venezuelan President Nicolas Maduro. The soldier collected $400,000 on the back of the classified information. He is now being prosecuted for his actions.

Predictive markets, like sports betting, can be manipulated. The manipulation just expands because in predictive markets, you can bet on more than sports.

The Difference

Besides offering you more than sports to wager on, prediction markets are peer-to-peer financial exchanges. This allows the contract prices to move up and down based on supply, demand, and implied probability. Their ability to use YES or NO shares priced between $0 and $1 directly translates to the probability of an event occurring in real time. This means you can buy and sell positions mid-game as probabilities shift. You are “day trading” an event before it ends.

Prediction markets allow you to wager on politics, the weather, economics, and popular culture in addition to sporting events, exceeding the options you are given with ‘traditional’ sports books.

Sportsbooks

Operating Platform

Sportsbooks strictly cover athletic events, game stats, and player props. The platforms that offer sports betting are classified and regulated as gambling. This requires state-by-state licensing in the United States, generating traditional gaming tax revenue.

The Difference

Sports betting is a house-backed game with fixed odds. You are betting against a centralized bookmaker who is setting those odds with a built-in mathematical edge that helps guarantee profitability for “the house”.

While some sportsbooks allow you to “cash out” (at a lower sum), unlike the predictive markets that allow you to “day trade” an event before it concludes, with sportsbooks you are locked in to the initial price of the wager.

DFS ( Daily Fantasy Sports)

The apps that provide DFS are regulated differently from traditional sportsbooks. DFS apps are legally classified as games of skill rather than games of chance (sportsbooks). When playing in a DFS contest, you are:

• Playing in person(s)-to-person contests
• You are drafting real-life athletes and are competing against other users' lineups
  • You choose the size of the tournaments and which prize pools suit you
• DFS also allows player prop betting when you predict whether a particular athlete will go more or less (higher or lower) than their projected stat line

Because this is perceived to be games that require skill, DFS play can be legally available in states where traditional sports betting is not allowed.

Which One Is Right For You: Choices

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Availability

The first course of action is to determine if your state allows SportsBooks or DFS. The answer can make your decision a lot easier.

If there is a choice to be made, make it on the knowledge of how much you can safely lose. Because whether you are playing in the predictive markets, traditional sportsbook, or DFS, “may the odds be ever in your favor”, because general speaking, they are not.