With sports event contracts accounting for a significant percentage of volume on prediction markets, yes/no exchanges are seen as competitive threats to online sportsbook operators. The 12-month price declines for stocks like DraftKings (NASDAQ: DKNG) and Flutter Entertainment (NYSE: FLUT) reflect this concern, but may be overstated.
In a new report to clients, Citizens Equity Research analyst Jordan Bender says that prediction market cannibalization of regulated online sportsbooks isn’t worsening and may be easing. Citing Juice Reel data, the analyst mentions that just 4% of regulated sportsbook handle has departed for prediction markets for good. If anything, prediction market operators may be helping by broadening the field of people interested in sports wagering.
“Prediction market companies are successfully using marketing initiatives to bring new customers into the ecosystem who otherwise may not have entered the industry or would have eventually gravitated toward sports betting apps,” notes Bender. “Cannibalization not getting worse and customers spending more is a bullish signal heading into the NFL season, leading us to believe handle will start to accelerate in 4Q26E.”
Of note to both the prediction market and sports wagering industries, bettors that embrace both platforms are typically bigger spenders. Bender points out that “online sports betting wallet size increased 27% in the six months following adoption” of an event contract platform.
But Prediction Markets Are Legitimate Competition
While cannibalization concerns may be easing, that doesn’t eliminate the clear competitive threat posed to regulated sportsbooks by prediction markets.
“It is clear that prediction markets are becoming a meaningful source of competition for traditional sports betting, with prediction market bets now representing 11% of combined wagering across sports betting and prediction markets, up from essentially zero earlier last year,” adds Bender.
The budding rivalry between the two industries is one reason why some sportsbook operators, including FanDuel parent Flutter, are committing to significant promotional spending this football season — expenditures that unnerved investors.
Still, prediction market volume figures may need to be consumed with grains of salt because as Bender points out, those data points are influenced by sharps, VIPs and whales — bettors who are often limited or turned away from traditional regulated sportsbooks.
Flutter, Super Group Seen as Betting Equity Winners
Acknowledging that Flutter’s “story has been messy” over the past 12 months, Bender highlights the stock as one to own into and over the course of the 2026 football season, citing leadership changes and rising sports betting market share.
“The company has been in a knife fight in this industry for decades, and its war chest of cash should bode well for accelerating growth,” says the analyst. “Whether the incremental investment outlined in 2H26 is repeated in 1H27 remains an uncertainty for the stock, and we now reflect this in our estimates and assume it is likely, but we see several catalysts and accelerating growth in 2027 as reasons to own the name.”
He also expressed a preference for Super Group (NYSE: SGHC), which is something of a prediction market “antidote” play because the company operates an iGaming-first model and doesn’t book sports bets in the ultra-competitive U.S. market. Bender says that stock trades at a valuation discount while the company has “the clearest path to sustainable growth” among the online gaming names in his coverage space.