Prediction markets barely make money; sportsbooks make money(ft.com)
ft.com
Prediction markets barely make money; sportsbooks make money
https://www.ft.com/content/1ac03f57-bd5d-4196-85ff-4bd96dc69e0d
5 comments
One structural difference seems to be incentive alignment.
Sportsbooks monetize volume and friction, while prediction markets depend on sustained liquidity and accurate pricing, which is much harder to maintain at scale.
It feels less like a failure of the idea and more a mismatch between economic incentives and market expectations.
The article talks about how prediction markets' sports books are significantly more profitable. This has less to do with financial structures and more to do with who wants to make bets and where.
According to the article, prediction markets make magnitudes more money on potentially illegal (by today's standards in the US, anyway) sports betting than true event contracts.
According to the article, prediction markets make magnitudes more money on potentially illegal (by today's standards in the US, anyway) sports betting than true event contracts.
That’s a fair point. I agree the current profitability is largely driven by demand patterns and regulatory arbitrage rather than pure market design.
My comment was more about why the underlying event-contract model struggles to scale sustainably, even when interest exists.
Prediction markets, as they currently stand, are at least better with regard to having a lower take and are less predatory in their wagering products and marketing (although these points can very easily change, but the complex wagering menus will be less liquid and harder to grow). If the house cut is 1-3%, that is still drastically better than the other parimutuel wagering in America, horse racing, which is typically 20-25%.