A new survey from the customer experience firm Fullstory found that 60 percent of bettors say prediction markets have changed how often they use traditional sportsbooks, and 35 percent say they now use sportsbooks less specifically because of prediction-market alternatives. Roughly a quarter use both, splitting different kinds of bets between the two.
The reasons bettors gave for switching had less to do with the math of any particular wager than with how the platforms feel to use. Trust and reputation topped the list at 60 percent, followed by ease of use at 59 percent and potential payouts or odds at 51 percent. Most strikingly, 77 percent of respondents said they had switched platforms entirely based on user experience alone.
"The biggest threat prediction markets pose to sportsbooks may not be that consumers stop betting on sports," said Jason Wolf, Fullstory's president. "It's that they reset consumers' expectations for what a betting experience should look like."
The money at stake is substantial on both sides. Americans wagered $166.94 billion on sports through traditional sportsbooks in 2025, generating $3.71 billion in state tax revenue. Prediction markets, spanning platforms like Kalshi, Polymarket, and Novig, are estimated by economists to already total somewhere between $50 billion and $100 billion in size, and are believed to have diverted more than $500 million in potential sports-betting tax revenue away from states so far.
That tax gap exists because prediction markets aren't licensed or taxed the way sportsbooks are. They operate under the Commodity Futures Trading Commission's federal commodity-futures rules rather than state gaming boards, meaning none of the state sportsbook licensing or betting taxes that apply to a traditional book apply to them. Illinois tried to close that gap by imposing a 15 percent tax on prediction-market sports contracts, prompting Kalshi to sue the state, arguing states have no authority to tax a federally regulated product. Similar regulatory fights are now underway in Nevada, New Jersey, and Maryland.
It's a fight state regulators may struggle to win on speed alone. Prediction markets have already built the habits and expectations Wolf describes, and unwinding that now would take more than matching a specific payout or point spread.