A new breed of federally regulated prediction markets is siphoning off a growing share of betting activity around the Super Bowl, a shift that has weighed on the shares of incumbent gambling giants such as FanDuel and DraftKings.
While traditional sportsbooks are still expected to see a slight increase in total wagers for the championship game, analysts now project that prediction markets such as Kalshi will capture around 80% of all year-on-year growth in wagering activity for the event, attracting an estimated $630 million in bets.
This shift highlights what analysts describe as a successful “regulatory flank”. Prediction markets have positioned themselves as federally regulated prediction markets operating under Commodity Futures Trading Commission (CFTC) oversight, rather than as gambling platforms subject to state-by-state licensing.
This allows them to operate in states where traditional online sports betting remains illegal, including large markets such as California and Texas.
The Market Reacted
Shares of FanDuel-owner Flutter Entertainment have entered an eight-week slide, the longest in more than two decades, while DraftKings is trading near its lowest levels since 2023. Wall Street analysts have cut consensus fourth-quarter earnings estimates for Flutter and DraftKings by 49% and 29%, respectively, over the past three months.
“A big piece of why we think Super Bowl handle will be down [for traditional sportsbooks] is that prediction markets are taking a bite out of that,” Jordan Bender, a senior equity analyst at Citizens JMP, told Bloomberg.
Until early 2025, the CFTC had signalled that sports-related contracts were off-limits. Following the 2024 election and a shift toward a lighter-touch regulatory approach, Kalshi began offering contracts linked to the Super Bowl. The CFTC did not intervene. Since then, sports-related contracts have come to account for more than 90% of Kalshi’s trading volume.
Incumbent Operators Responded
Both DraftKings and FanDuel have launched their own prediction market applications to compete in states where their core sports betting products remain restricted.
However, early adoption has favoured first movers. In January, Kalshi’s app was downloaded 1.9 million times, compared with fewer than 100,000 combined downloads for the new prediction market apps from DraftKings and FanDuel, according to Sensor Tower data.
While some gambling executives argue that these platforms primarily attract less profitable “sharp” bettors, usage data suggests meaningful overlap. Around 10% of DraftKings users were also active on Kalshi in January.
The competitive and regulatory landscape continues to evolve. DraftKings has announced a partnership with prediction market platform Crypto.com to expand its range of contracts, while state gaming regulators are challenging the legality of sports-related event contracts in court, raising the prospect of a Supreme Court review.
For now, the new CFTC chair has indicated that sports contracts will be allowed to proceed.
For the broader financial and fintech industries, the Super Bowl of 2026 offers a clear strategic lesson. Prediction markets did not displace incumbents by competing within the same regulatory framework, but by operating under a different one.
This article was written by Tanya Chepkova at www.financemagnates.com.
Source link
