The prediction market is being severely overestimated. This conclusion sounds quite harsh, especially considering the billions of dollars in trading volume each month, the several-fold growth rate, and the valuations of $22 billion for Karl Xi and $20 billion for Poli Market. Each set of data tells a story of capital rushing in crazily. However, after H2 Gambling Capital's analysis team weighed the prediction market against licensed sports betting operators, they discovered a completely different truth behind the headline numbers. The core logic of this analysis is not complicated: the trading volume touted by the prediction market and the betting amounts disclosed by sports betting operators are two different metrics that cannot be directly compared. Mixing the two is like comparing the weight of apples to the number of oranges. Once the trading volume of the prediction market is converted into a comparable metric of equivalent betting amounts, its real share in the market competition quickly shrinks to single digits.
Trading volume is not equal to betting amount, the Super Bowl data reveals the first crack
During the 2026 Super Bowl, one headline was particularly eye-catching: the prediction market had a trading volume of $1.6 billion, surpassing the sports betting amount of $1.4 billion. On the surface, this seems to be the case, but internal data from David Hoffman, COO of Sporttrade, shows that the conversion relationship between trading volume and betting amount varies greatly across different events. In golf and futures markets, the betting amount is only 5% to 20% of the trading volume; in single-event sports like basketball, football, and baseball, this ratio increases to 45% to 55%. Sporttrade has the ability to reveal this relationship because it is both a state-regulated betting operator and also measures internal trading volumes, making it one of the few entities that can observe both types of data. With this conversion, the equivalent betting amount of the prediction market in the Super Bowl event is about $800 million, far from the $1.6 billion mentioned in the headline.
After further stripping away entertainment contracts and cross-season futures contracts, H2 estimates that the actual trading volume of the prediction market in the Super Bowl main game and related prop bets was $633 million, which converts to an equivalent betting amount of $317 million at about 50%, while the betting amount of licensed sports betting operators during the same period was $1.412 billion. This means that in a comparable metric, the prediction market only accounted for 18% of the share. But even this number still overestimates its real performance in a fully competitive environment. The prediction market can cover the entire US, while sports betting is still illegal in states that account for about 35% of the US adult population and GDP. H2 conservatively estimates that in states without legal sports betting, the revenue of the prediction market is 3.5 times that in competitive states. After excluding this geographical dividend, the equivalent betting amount contributed by the prediction market in directly competitive states is about $110 million, and the market share plummets to 7%. More subtly, the prediction market is open to users aged 18 and over, while the legal age threshold for sports betting is 21 years old, and there is also about 1% of self-excluded users who cannot be served by legal betting platforms, these two groups together account for about 6% of the potential market. When this 6% exclusive track is also taken into account, the real share of the prediction market and licensed sports betting on the same starting line is almost negligible.
The Masters is the best battlefield for the prediction market, but its advantage is still overestimated
Golf events, due to their multi-day format and allowance for repeated trading, are seen as the project where the prediction market has the most structural advantage over sports betting. During the 2026 Masters, Karl Xi's single platform reported a trading volume of $545 million, and together with Poli Market and other platforms, H2 estimates the total trading volume to be about $700 million. Using the midpoint of 12.5% from the 5% to 20% range of golf class trading volume to betting amount conversion, considering the excess profit in states without sports betting, the equivalent betting amount of the prediction market within legal betting states is only about $30 million. In contrast, licensed sports betting operators generated about $230 million in betting amounts for the Masters alone in 2025. This means that even in its most favorable event, the market share of the prediction market is only 12%. However, due to the income from transaction fees brought by frequent trading, its share in total gambling revenue can reach about 10%, performing better than the Super Bowl.
This structural advantage is not a new thing. H2 traces the essence of the prediction market back to the ancient prototype of gambling exchanges—Betfair in the UK. Betfair once held a significant share in the horse racing betting market due to its ability to hedge and trade positions, but this advantage was not successfully replicated in other betting categories. History provides an intriguing footnote: Betfair eventually launched its own traditional sports betting platform in 2012 to compensate for the shortcomings of the pure exchange model. For those who are better at finding patterns from history, the tulip mania in Haarlem in 1637 might also be a reference worth reviewing.
PASA official website continues to track the global gambling industry competition pattern and the compliance process of emerging business forms, noting the significant discrepancy between the soaring valuations of the prediction market and the actual performance revealed by H2. The value of this quantitative analysis lies not in denying the long-term potential of the prediction market, but in providing the industry with a perspective to view the real competitive situation from a unified standard and to detach from the bubble. The future of the prediction market may depend on its ability to prove its competitiveness outside the regulatory vacuum, rather than just running alone on a track without competitors.
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This article is from "PASA-Global iGaming Leaders," a gambling industry news channel: https://t.me/pasa_news
Original deep channel for gambling: https://t.me/gamblingdeep
Free data report: @pasa_research
PASA Matrix: @pasa002_bot
PASA official website: https://www.pasa.news
