Prediction Markets vs. Sports Betting: What’s The Difference? 

If you enjoy forecasting outcomes, there are now more options to consider. Prediction market traders can buy and sell shares on various contracts, such as which team will win the next Super Bowl or the winner of the Masters. Contract pricing is dynamic and fluctuates in response to trading activity and the collective sentiment of the market. 

Meanwhile, sports bettors allows bets at fixed odds on the same markets. Are there advantages to one approach over the other and what’s the difference between prediction market pricing and sports betting odds?

We answer those questions and more as we take a complete look at both options with real-world examples. 

Prediction markets vs. sports betting

Prediction markets and sports betting share several similarities. In both cases, you’re attempting to predict future outcomes. Correct calls can lead to profits, while you can walk away with nothing when you make incorrect choices. As you dig deeper into the two styles of forecasting, there are notable differences to know. 

How the pricing works in a prediction market

Interest in prediction markets has exploded recently. One of the biggest catalysts has been the introduction of sports contracts on various platforms. In a nutshell, a prediction market is an online platform where users can trade outcomes tied to future events. 

Beyond sports, popular attractions include politics, economic indicators, and entertainment topics. The markets are typically presented with “Yes” or “No” options on the outcomes, with pricing reflecting the perceived probability of it happening.

For example, consider the pricing at Kalshi for which team will win the NBA Finals. As we examined the market, the playoffs were right around the corner. Just three teams were trading at a price above $0.10 to win it all:  

• Pro Men’s Basketball Champion
• Oklahoma City Thunder: $0.34
• Boston Celtics: $0.30
• Cleveland Cavaliers: $0.13

The market points to the Thunder as the overall favorite. The pricing indicates a 34% chance of Oklahoma City winning the title, with Boston at 30% and Cleveland at 13%. Behind the three leaders, just seven other clubs are viewed as having a 2% chance or greater of winning.    

Once the NBA Finals come to a close, winning contracts are paid out at $1.00. Contract pricing for teams that fail to seal the deal will equal zero. For a $100 trade on the Thunder at $0.34, that would translate into 294.12 shares. At $1 per winning contract, that equals a return of $294.12. 

Naturally, platforms get a fee that varies based on the pricing of the market. Using Kalshi as an example, fees on a $100 contract are capped at $1.74. On the whole, prediction markets are event-focused and provide real-time insight into the overall sentiment of an outcome.   

How odds work in sports betting

Legal online sports betting remains immensely popular across legal wagering states. Bettors can choose from a range of top online sportsbooks such as FanDuel, DraftKings, BetMGM, and Caesars, with the mix of options varying by market. 

Sportsbooks have odds available for a variety of markets, including individual games and events, futures, and a wide variety of props. In the US, American odds is the most common format, while other countries present the numbers in decimal or fractional form. 

Using American odds as an example, here’s what the moneyline looks like at FanDuel for an upcoming MLB game:

• Chicago White Sox at Cleveland Guardians
• White Sox: +200
• Guardians -245

For moneyline odds, a negative number indicates the favorite in the matchup, while the odds are positive for the underdog. The range between the numbers indicates the perceived closeness of the matchup. In this case, the Guardians are heavy favorites to win. 

Moneyline odds can also help you quickly determine the potential payout. At odds of +200, the profit potential is $200 on a winning bet. On the other side, to win $100 at odds of -245, you’d have to place a bet of $245. 

Sportsbooks make their money off the vigorish, which is a charge for facilitating the wager. Using odds of -110 as an example, a winning $100 bet would return $90.90. Why not a straight doubling of your money? The vig that’s built into the odds ensures the book gets its cut.  

Market sentiment vs. fixed odds

You will never have a direct apples-to-apples comparison between prediction market pricing and sportsbook odds. However, some markets can glean insights into correlations and differences. Here’s how prediction market pricing stacks up against sports betting odds in three popular markets. 

Super Bowl winner 

At Kalshi, the current most popular sports contract by volume is on the winner of the next Super Bowl, though you’ll find it listed as Pro Football Champion. As of this writing, over $34 million has been traded on this market.

Sportsbooks typically don’t provide an exact tally of betting on future events. However, it’s widely understood that the winner of the next Super Bowl is the most popular futures market on the board. 

The table below compares the current Kalshi “chance of winning” versus the FanDuel odds for the top five favorites to win the next Super Bowl. 

There’s agreement on both sides that the Eagles are the overall favorite to win, while the Lions have the fifth-best chance. In the middle, there’s a slight disparity. FanDuel odds point to the Raiders and Bills having a better shot than the Chiefs. Kalshi’s pricing places Kansas City ahead of the Lions, albeit slightly. 

Interestingly, you can dig into the “order book” for each team on Kalshi. This gives you further insight into contracts and demand at various price points, as in where the market may be headed. At sportsbooks, the odds will evolve in response to betting volume and other developments. However, there’s no peek behind the curtain into demand and volume.          

Masters Winner

The Masters is one of the four annual Golf majors. It’s a popular attraction at online sportsbooks, and we can now say the same about Kalshi. The prediction market platform has attracted over $15 million in contracts on the tournament winner. In advance of the first tee, just four golfers had a price greater than $0.05 on “Yes” for the Masters winner.  

• Masters Tournament Winner
• Scottie Scheffler: $0.17
• Rory McIlroy: $0.13
• Collin Morikawa: $0.07
• Jon Rahm: $0.06

At FanDuel and DraftKings, the two sportsbooks that attract the most overall volume, the same four names topped the odds board. However, the order was slightly different, with Rahm edging ahead of Morikawa for third place. 

In terms of the likelihood of winning, the pricing at Kalshi is in line with what top sportsbooks are suggesting. Just like with the Super Bowl, bettors can dig deeper into the numbers at the former to get a sense of overall demand and what traders are willing to pay.  

As the Masters got underway, Scheffler got off to a solid start, with his odds shifting to +250 at FanDuel and DraftKings. His price at Kalshi climbed to a “Yes” price of $0.28. 

If we dig into the Kalshi order book, we find over 200,000 contracts with an “ask” of $0.29 or more and over 100,000 “bids” at $0.28 or less. The real-time look at market demand is a game-changer for those into sports forecasting.    

UFC Main Event

While many of the markets available at Kalshi involve multiple choices, some contracts revolve around a single upcoming outcome. UFC 314 is approaching, with Alexander Volkanovski and Diego Lopes set to square off in the main event. To date, over $631,000 contracts have been traded on the winner of the fight at Kalshi.

• UFC 314: Volkanovski vs. Lopes
• Volkanovski: Yes, $0.55
• Lopes: Yes, $0.47 

At DraftKings, the moneyline odds are also tight for what’s expected to be a competitive matchup. 

• Featherweight Title: Volkanovski vs Lopes
• Volkanovski: -130
• Lopes: +110

For moneyline odds, we can translate the listed number into implied probability with straightforward calculations for both positive and negative numbers. 

• Negative: Odds/(Odds+100)*100 = implied probability
• Volkanovski: 130/(130+100)*100 = 56.52%
• Positive: 100/(Odds+100)*100 = implied probability
• Lopes: 100/(110+100)*100 = 47.62%   

In this case, there’s a strong correlation between the probabilities. Volkanvoski has a slightly better chance of winning based on the sportsbook odds, while the numbers for Lopes are right in range. So what does this mean for your bottom line? 

If you bet $100 on Volkanovski to win at -130, the profit potential is $76.90, leading to a total return of $176.90 if he wins. A wager of the same amount on Lopes at +110 would bring back $110 if he came out on top, for a total return of $210. 

For those who spent the same $100 on Lopes at $0.55, they’d have 181.82 shares. If he wins, those contracts settle at $1. That translates to $181.82, minus platform fees.    

If you spent $100 on Lopes at $0.47, you’d get 212.76 shares. An upset victory settles those contracts at $1, which translates into $212.76, less fees.   

In all cases, a losing prediction or sports bet translates into zero returns. Whether you’re forecasting on prediction platforms or with online sportsbooks, be sure to keep that in mind.   

Which is better, prediction markets or sportsbooks?

If you’re into forecasting, there’s value to be found in both approaches. Prediction markets help you get a better sense of the actual sentiments of traders. To do the same with sports betting, you have to watch for shifts in the odds, which may or may not happen. 

As of now, there are more options available at sportsbooks. The majority of high-volume contracts in sports prediction markets revolve around future outcomes, such as the winner of a league championship. That said, the gap could close as the landscape is changing rapidly.

For experienced sports bettors, prediction markets can provide you with additional insight into the actual market sentiment of future outcomes. Instead of just patiently waiting for the odds to shift, prediction markets could also be used as a hedge against new developments.  

If you’re new to either style of forecasting, understand the concepts and how everything works before putting anything substantial at risk. One is not necessarily better than the other, so you can approach both with a learning mentality as you explore what works best for you.