Bank of America puts $1.1trn price tag on prediction markets
Table of contents
- A Bank of America report published on April 9 estimates annual US sports event contract volume could eventually reach $1.1 trillion, putting prediction markets on par with the largest online sportsbooks.
- Kalshi currently accounts for 89 to 90% of US prediction market activity, with sports contracts making up roughly 87% of its trading volume in March.
- Analysts project $100 billion in contract volume for 2026, with a long-term revenue potential of $10 billion per year at an average fee rate of around 1%.
Bank of America has put a $1.1 trillion long-term volume figure on the US sports event contract market, positioning prediction platforms as a structural threat to the established sports betting industry.
The bank’s analysts, Julie Hoover and Shaun Kelley, published the assessment on April 9, drawing on the rapid growth of federally regulated exchanges such as Kalshi.
The report assumes an average fee of around 1%, which would translate into approximately $10 billion in annualized revenue for event-betting companies. That figure directly mirrors DraftKings‘ own estimate of its total addressable revenue potential.
Bank of America expects approximately 9% of that $1.1 trillion figure to be realised in 2026, with around $100 billion in contract trades forecast for the year.
Kalshi’s dominant position
Kalshi controls an estimated 89 to 90% of event contract activity in the US, with its nearest domestic competitor, Crypto.com, holding just 4% per recent estimates. Polymarket, the leading offshore platform, was largely excluded from the analysis as it has not launched a regulated US product.
Sports-related contracts made up approximately 87% of Kalshi’s trades in March, a figure elevated by March Madness activity, showing how quickly the sector has pivoted toward sports as its primary revenue engine.
The Bank of America note identifies three structural advantages that give prediction platforms an edge over traditional sportsbooks. Platforms operate under federal CFTC oversight, allowing them to offer contracts nationwide rather than navigating a patchwork of state-level licensing regimes.
Many platforms also permit users aged 18 and above, broadening the addressable audience. Prediction market operators are additionally not subject to state gaming taxes, which compress margins significantly for licensed sportsbooks.
Analysts noted that sharp bettors typically banned or limited on regulated sportsbooks for winning too frequently find prediction markets attractive, as they face no such restrictions and can effectively trade against casual users.
Legal battles mount
Despite the bullish long-term outlook, the sector’s regulatory environment remains intensely contested.
In Nevada, Judge Jason Woodbury extended restrictions on Kalshi, preventing the company from offering event-based contracts to state residents without a gaming license and setting a May 4 deadline for full geofencing implementation.
Arizona filed approximately 20 criminal misdemeanor charges against Kalshi in March 2026 for allegedly accepting unlicensed wagers on sports and elections. Washington‘s Attorney General filed a civil lawsuit arguing the platform crossed state gambling and consumer protection laws.
The federal picture is more favourable. The Third Circuit Court of Appeals ruled 2-1 in favour of Kalshi in a New Jersey case, finding that the CFTC holds exclusive jurisdiction over the company’s contracts. It was the first circuit-level decision to firmly back federal primacy in this area.
The CFTC has itself filed lawsuits against several states attempting to impose gaming regulation on prediction platforms, framing those efforts as an intrusion on its statutory authority.
The Bank of America report prompted an immediate market reaction. Shares of DraftKings and Flutter Entertainment fell 7.06% and 3.89% respectively on the day of publication, extending broader downward trends. The two operators are down 33% and 50% respectively over the past year, declines analysts have partly attributed to the rise of prediction markets.
Prediction markets have spent two years arguing they are not gambling. Bank of America has now confirmed, in the language markets actually respect, that they are something more consequential than that. What happens next depends less on the numbers than on nine judges in Washington and a Congress that has yet to show any urgency.
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