Citizens has suggested that prediction markets platforms will be unable to compete with traditional sportsbook platforms on product features in the long term, while future legislation could curtail their growth.
The rise of the vertical has been significant, with Citizens analyst Jordan Bender noting that prediction markets present “the most competition we have seen in the betting industry” since the regulation of gambling in the US after the repeal of PASPA.
While heavy hitters in the space such as Robinhood and Kalshi aren’t expected to lose market share any time soon, a strong marketing push from the likes of DraftKings and FanDuel before the 2026 NFL season could tip the scales in favour of sportsbooks, Bender said.
DraftKings rolled out its DraftKings Predictions and FanDuel put its FanDuel Predicts product live last year. Other online sports betting firms such as Fanatics have also launched a prediction markets product.
Citizens wrote: “The greatest chance to disrupt the industry is through a new innovative product offering, in our view, similar to bet365’s surge in the UK following its development of the in-play betting product in the early 2000s.
“To this point, prediction markets do not offer a superior offering in the current industry format, other than having better cash out compared to traditional sportsbooks.
“In the near term, we do not expect Robinhood or Kalshi to lose market share, but believe a large spending campaign around the industry during the start of the 2026 NFL season will dislodge market share around the industry.
“Ultimately, we see DraftKings and FanDuel as main competitors to the incumbents with decades of operational experience in the betting industry, while many attempting to compete will fail.
“Longer term, sports betting legalisation in new states will put a ceiling on the TAM and make it increasingly difficult for an abundance of prediction market operators to compete in those respective states, in our view.”
The investment bank also drew comparisons between the number of companies clamouring to enter the prediction markets space with the wave of operators which entered the US sports betting market.
The note continued: “Prediction markets are competitive, the most competition we have seen in the betting industry since the initial launch of regulated gambling in the US. That said, a new operator appears to enter the market daily across a variety of sectors, including gaming, FinTech, media, brokerages, etc.
“By our count, over two dozen platforms are licensed or attempting to get licences to operate an exchange, and counting. As the number continues to grow, it brings us back to the initial wave of entrants into the online gambling space and the failure that followed.
“We estimate 68 companies have entered the legal US online gambling market since 2018 outside Nevada. Of the 68, 31 (46%) are still operational, 33 (49%) have shut down operations and four (6%) have been acquired.”
Citizens added that additional legalisation of online sports betting across the US will further limit the market share on offer to prediction markets platforms.
Missouri was the last state to approve sports betting, with its regulated market going live in December.
Meanwhile, prediction markets have experienced continued pushback from state regulators.
Arizona became the first state to file criminal charges against an event contracts provider last week, after Attorney General Kris Mayes opened legal proceedings against Kalshi.
The company has also had to temporarily cease operations in the state of Nevada, after the Nevada Gaming Control Board was granted a temporary restraining order.
Regulators in Tennessee and Connecticut have also sent cease-and-desist orders to prediction market platforms in recent months.
The post Citizens: Prediction markets unlikely to rival sportsbooks in the long term first appeared on EGR Intel.
Investment bank says the vertical “does not offer a superior product” to traditional operators in its current form
The post Citizens: Prediction markets unlikely to rival sportsbooks in the long term first appeared on EGR Intel.