Retail traders underperform compared to sportsbooks in prediction markets.

A recent analysis from Citizens JMP indicates that median losses are more significant on prediction platforms, as retail traders encounter more adept and better-funded counterparties

What to know:

• Retail participants in prediction markets are incurring greater losses than those engaged in legal sports betting, with a median return of -8% since mid-2025, compared to -5% on sportsbooks, while only the highest-volume prediction market traders achieve consistent profitability.
• Due to the absence of restrictions on winning players in prediction markets, retail traders are more directly facing professionals and market makers.
• While gaming executives assert that prediction markets are not significantly affecting existing sportsbook revenue, platforms such as Kalshi are appealing to a younger audience and experiencing substantial growth in downloads, potentially attracting the next generation of bettors before they register with DraftKings or FanDuel.

Prediction markets are intriguing, yet they do not serve as reliable wealth generators for retail participants.

Research conducted by Citizens indicates that retail users of prediction markets are losing more money than legal sports bettors, with the most adept traders and market makers profiting from their flows. The research also highlights that these platforms are attracting a demographic younger than that of conventional sportsbooks.

The median return for a prediction market user was -8% from July 2025 to mid-March, as opposed to -5% for sportsbook users within the same timeframe, according to Citizens JMP Securities analyst Jordan Bender, referencing transaction data from analytics firm Juice Reel.

Individuals trading above $500,000 on prediction markets achieved a median ROI of +2.6%, aligning with benchmarks for sharp bettors as confirmed by professional players. All cohorts below this threshold reported negative returns, with those trading less than $100 facing a decline of -26.8%.

No cohort within legal sports betting reported profitability either, but the decline was less pronounced: the $500,000-plus sports betting cohort experienced -0.6%, while smaller accounts recorded -29.3%.

A key difference between the two platforms lies in the nature of the counterparties involved in the trades.

Prediction markets do not impose limits or bans on profitable users as regulated sportsbooks do, which concentrates informed activity on these platforms. This reverses the traditional model. In sportsbooks, the house mitigates risk by excluding winning players. In prediction markets, retail traders are directly exposed to professionals, market makers, and high-volume participants who consistently transact against less informed flows.

Two professional bettors during a Citizens JMP call last week stated that prediction markets present a more favorable route to achieving positive returns precisely because retail users contribute the liquidity, as noted in the report.

Are prediction markets a threat to online gambling?

Executives in the gaming industry have downplayed the potential threat posed by prediction markets, according to the Citizens JMP report, which gathered insights from four Q4 2025 earnings calls.

Jason Robins of DraftKings remarked that prediction markets do not significantly add to the existing customer base. Peter Jackson from Flutter mentioned that there was no evidence of substantial cannibalization. Adam Greenblat from BetMGM estimated a minor impact on betting revenue, ranging from a low to mid-single-digit percentage. Citizens JMP’s estimate hovers around 5%.

The more pressing concern may not be about cannibalization, but rather about user acquisition. Approximately 24% of Kalshi users are under 25 years old, with a median age of 31, in contrast to just 7% for DraftKings and FanDuel, where the median age is closer to 35, as reported by Sensor Tower data referenced in the report. About 90% of DraftKings revenue is derived from users aged over 30, the report indicates.

Downloads for FanDuel and DraftKings decreased by 18% and 13% year-over-year from September 2025 to February 2026, based on Sensor Tower data cited by Citizens JMP. During the same period, Kalshi recorded 6.3 million downloads.

Prediction markets might not be drawing existing sportsbook users away. Instead, they may be intercepting the upcoming generation before they ever register with DraftKings.