Sportsbooks have had a free run at the online sports betting market in recent years, with fans finding this a popular way to get the latest odds. However, this tradition model, based on house offered odds, has been disrupted with the recent rise of prediction market platforms.

Source: PxHere

How Do Prediction Markets Work?

Sites like Kalshi and Polymarket might look a lot like sportsbooks at first glance, but we need to take a closer look at how they work to understand the fundamental differences between these different platforms.

A sportsbook offers odds on a given outcome based on its likelihood, as assessed by oddsmakers. The business model of sportsbooks, or its juice (vig), ensures they are ensured to make a profit over time. With prediction market sites, you’ll see that the bets are based on contracts where you answer a yes or no question, such as whether the Bruins will win the Big Ten Conference. Rather than odds, you’ll see the current market price, which settles at $1 if the prediction is correct and $0 if it isn’t.

This means that the price it’s trading at replaces the odds. Let’s say that the odds of the Bruins winning their championship are currently trading at $0.50. This tells us that the market believes there’s a 50% chance of it happening.    

You’re basically trading against other users, with the house acting market-neutral. They make their profits through a small transaction fee on each trade. As for the price, this is simply set by supply and demand. If many people suddenly decide that the Bruins are going to win the league, you’ll see their price start to rise accordingly. It’s an approach that offers a lot of added flexibility, too. Users can enter and exit positions at any time, with money not locked in any way.

Source: PxHere

The Main Operators and the Regulatory Advantage

Kalshi is one of the biggest operators in this growing market. This company hit the headlines when the Commodity Futures Trading Commission (CFTC) confirmed that it would be federally regulated as a financial exchange rather than a sportsbook. This allows users to trade predictions on the platform even if they live in states where sports betting isn’t allowed. As reported recently by CNBC, the company stated ahead of the Super Bowl that it’s expanding its surveillance methods to avoid insider trading.

This new user promo for Kalshi reveals that newcomers can get started with the help of a bonus. It also points out that it’s available in more than 40 states, with categories including sports, weather, and pop culture. Arizona, Illinois, and Massachusetts are among the few states where it can’t be used.

Polymarket is a crypto-based alternative, since it operates on the blockchain.  It’s defined by a high level of liquidity and a huge range of popular culture prediction markets, with trades on everything from Bitcoin’s price to the latest celebrity news. This Yahoo Finance report confirms that it has been regulated in the US since late 2025, although the version available here is different from what users in other countries can access.  

These prediction markets have changed the way we think about gambling. By offering an alternative to sportsbooks, they’ve provided an approach that seems to be working for many sports fans.