Published on: April 9, 2026, at 05:01h.

Updated on: April 9, 2026, at 05:01h.

• Bank of America forecasts sports event contracts in prediction markets could reach an impressive $1.1 trillion in yearly transactions.
• This could lead to $10 billion in earnings, factoring in a 1% commission rate.
• The findings caused a decline in sports betting stocks.

According to a recent report by Bank of America, sports event contracts on prediction markets, such as Kalshi and Polymarket, have the potential to generate an annual volume of $1.1 trillion.

The timing of this report is crucial as yes/no betting exchanges seek to expand beyond sports markets. However, Bank of America highlights that nearly 80% of Kalshi’s trading volume in March was linked to sports event contracts. The bank points out there are opportunities outside the sporting realm, noting that derivatives related to cryptocurrencies make up two-thirds of the exchange’s non-sports volume. There’s also growing interest in event contracts focusing on culture and politics, alongside mention markets gaining traction with traders.

Kalshi’s Growing Influence

The sports betting landscape in the U.S. is primarily dominated by DraftKings (NASDAQ: DKNG) and Flutter Entertainment’s (NYSE: FLUT) FanDuel. Within the prediction markets sector, Kalshi is establishing its dominance. Bank of America projects that Kalshi accounts for an impressive 90% of event contract activities in the U.S., with its closest competitor, Crypto.com, capturing just 4%.

“Kalshi is rapidly integrating into daily life, providing continuous odds for markets spanning finance, cryptocurrency, pop culture, and sports,” remark Bank of America analysts Julie Hoover and Shaun Kelley.

Kalshi’s growth can be partly attributed to Polymarket not yet being operational in the United States. As for whether Kalshi and its rivals can achieve the $1.1 trillion mark in annual sports event contract volume, it seems feasible. Research indicates that experienced sports bettors are shifting from traditional sportsbooks to prediction markets where they won’t face restrictions for winning too much. Furthermore, platforms like Kalshi often offer incentives for high-stakes sports bettors by lowering or waiving fees in return for the liquidity they provide.

“Savvy bettors frequently encounter bans or limits on regulated sportsbooks for outperforming the house too often,” state the Bank of America analysts. “For these individuals, who tend to wager higher amounts than casual customers, prediction markets offer a more appealing option since they don’t face limitations and can compete against casual bettors alongside the sportsbook owners.”

Market Reactions to the Report

In a familiar pattern, concerns about prediction markets encroaching on the territory long held by gaming companies led to a drop in the sports betting stock sector. The report from Bank of America resulted in DraftKings and Flutter shares falling by 7.06% and 3.89% respectively today, although trading volumes for both stocks were below average.

Over the past year, shares of DraftKings and Flutter have seen declines of 38% and 55.5% respectively, with some of these losses attributed to the rise of prediction markets. While certain studies suggest that prediction markets have not drastically impacted sportsbooks’ market share, Bank of America confirms the emerging industry has distinct advantages.

These advantages include federal regulations that currently allow yes/no exchanges to offer sports contracts in certain states where sports betting is prohibited, a younger audience, and unclear taxation rules. This means companies like Kalshi are not subject to the same state-level tax implications that sportsbooks face.