Prediction markets are taking over sports gambling, here's how they work
Prediction markets like Polymarket let users trade outcome-based contracts, gaining ground in sports gambling despite volatility and regulatory concerns.Summary
Prediction markets are becoming a major force in sports gambling, with Polymarket recently surpassing $1 billion in annualized revenue. These platforms use event trading: users buy contracts based on outcomes, priced according to probability. For example, a team with a 46% chance to win would have contracts starting at 46 cents, each paying $1 if the prediction is correct. Users can trade during games as events unfold. However, research by Ayush Jha and colleagues at Texas Tech, who studied the 2025 NFL season on Polymarket, found that large traders or "whales" dominate price movements, making these markets volatile and risky. Unlike traditional financial markets, they lack safe assets. Jha calls for improved regulatory compliance, similar to 24/7 monitoring in financial markets.
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