Bank of America Says Prediction Markets Could Hit $1.1 Trillion in Annual Volume — What That Means for Sports Bettors

A Bank of America research report released this week put a number on something the sports betting industry has been quietly watching for months: the potential size of the prediction market category. The figure — $1.1 trillion in annual volume — is so large it sent DraftKings and Flutter Entertainment’s FanDuel stock tumbling the same day it was published, with DraftKings falling more than 7 percent and FanDuel parent Flutter dropping nearly 4 percent.

For sports bettors trying to make sense of what prediction markets are, how they differ from traditional sportsbooks, and what this report actually means for them, here is the full breakdown.

What Prediction Markets Are — and Why They’re Different

Traditional sportsbooks operate by setting a line and collecting a vig — a built-in margin that ensures the house profits regardless of the outcome. When you bet on a game at -110, you’re paying a 10-cent fee to the house for the privilege of participating. The sportsbook makes money by balancing action and collecting juice on every transaction.

Prediction markets work differently. Platforms like Kalshi offer binary contracts — “Yes” or “No” outcomes on real-world events, including sports results. The price of each contract reflects the market’s collective assessment of the probability. If you buy a “Yes” contract on the Kansas City Chiefs winning their next game at 70 cents, you win $1 if they win, netting 30 cents per contract. The platform charges a small transaction fee rather than embedding a vig into the odds. For sharp bettors who consistently beat the market, this is a fundamentally different and more attractive structure: they don’t get limited or banned for winning too much, as they routinely do at traditional sportsbooks.

The Numbers Behind the Report

The Bank of America report, authored by analysts Julie Hoover and Shaun Kelley, estimates that prediction markets in the US are on track to generate roughly $100 billion in verified trades in 2026 — approximately 9 percent of the projected $1.1 trillion ultimate market size. The $1.1 trillion figure is not a near-term projection; it represents the analysts’ estimate of the total addressable market if prediction platforms capture the same scale as the existing US sports betting ecosystem.

The math behind the revenue projection is straightforward. If prediction market platforms charge an average fee of 1 percent on every dollar traded, and trading volume reaches $1.1 trillion annually, that produces $10 billion in platform revenue. For comparison, the entire US regulated sports betting market generated approximately $11 billion in gross gaming revenue in 2025. The Bank of America projection effectively suggests prediction markets could eventually match the revenue of the entire current US sportsbook industry through transaction fees alone.

Kalshi’s Stranglehold on the Market

Among the report’s most striking data points: Kalshi accounts for approximately 90 percent of all event contract activity in the United States. Its nearest domestic competitor, Crypto.com, holds just 4 percent of the market. Polymarket, the largest global prediction market by volume, is not yet live in the US and is not included in the domestic figures.

Seventy-nine percent of Kalshi’s trading volume in March 2026 was tied to sports events — a figure that underscores why the traditional sportsbook industry views the platform as a direct competitive threat. Kalshi operates under federal CFTC oversight rather than state gaming licenses, which allows it to offer sports event contracts in states where sports betting is not yet legal. It also sets its minimum participation age at 18, versus the 21 minimum required in most regulated sports betting states. Those structural advantages — federal reach, lower age threshold, and no vig structure — are exactly what the Bank of America analysts cite when explaining prediction markets’ appeal to younger users and sharp bettors.

The Legal Battles Complicating Everything

The report arrives at a complicated moment for Kalshi legally. Nevada courts upheld an operational ban against the platform the same week the report was published, with a permanent injunction on the horizon. Arizona’s attorney general filed criminal charges against Kalshi, accusing it of operating an unlicensed gambling service. A federal judge denied Kalshi’s attempt to block Arizona from prosecuting it. More than a dozen states are actively pursuing legal action against prediction market platforms on similar grounds.

Kalshi CEO Tarek Mansour has pushed back forcefully on each action, calling the Arizona charges a “total overstep” and arguing that federal CFTC oversight preempts state gambling law. The CFTC under the Trump administration has generally been supportive of prediction markets, creating a direct regulatory tension between federal and state authority that courts are still working through.

What This Means if You’re a Sports Bettor

For casual bettors, prediction markets represent a different kind of betting experience — one that looks and feels similar to a sportsbook but operates under different rules, different fee structures, and different legal frameworks. The absence of vig is genuinely attractive for bettors who think they have an edge; the trade-off is thinner liquidity on some markets and a more complex interface than most sportsbooks offer.

For sharp bettors who have been limited or banned at traditional sportsbooks, Kalshi and similar platforms offer something increasingly rare: a place to play without artificial restrictions. The Bank of America report confirms what many industry observers already suspected — that migration of sharp money from traditional books to prediction platforms is real and accelerating.

The $1.1 trillion figure is a ceiling, not a near-term target. But the direction the industry is moving is no longer in question.