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Football is the most-watched event in the United States. Over the next month, the NFL and College Football Championship Series will likely attract huge ratings across the streaming and cable landscape. Last year, seven of the top ten most viewed cable television shows in December were from college football games. The NFL championship games in January of 2025 attracted nearly fifty million viewers each. Linked to these events is the ability to make a wager on outcomes or activity in the contest. Sports betting used to be confined to the state of Nevada. Up until 2018, Las Vegas was the place where people would go if they wanted to ‘enjoy’ the thrill of watching and betting on a football game. On May 14, 2018, the Supreme Court struck down the Professional and Amateur Sports Protection Act (PASPA). By doing so, it allowed individual states to legalize and regulate sports betting. Today, thirty-eight states permit sports wagering in their areas. Now, another contender to eat into the gaming market has entered the fray. They are called prediction markets. Over the last year, the ability to make markets on events with outcomes in sports, politics, business, weather, travel, and anything you can imagine has gained surprising adoption. The overwhelming majority of prediction volumes involve sporting events, and specifically football. Why does this matter for the investment world?
Increasingly, the public uses its money to try to make a profit. Traditionally, the investment world was the domain where that took place. Over the last twenty years, as markets have become digitized, custodians and exchanges created products that provide easy access through various electronic devices, especially smartphones. Custodians like Interactive Brokers and Robinhood offer prediction markets to customers for this type of activity. If one looks at the explosion of related instruments like weekly options, levered ETFs, levered ETFs on single stocks, and ETFs related to any geography or activity, one can legitimately argue that the lines between investing and gambling are, at the very least, blurring.
The two largest entities in prediction markets are Polymarket and Kalshi. Both have partnerships with custodians and exchanges to offer prediction products. In October of 2025, Polymarket received a $2 billion investment at a $9 billion valuation from the Intercontinental Exchange (ICE) to provide access to prediction products for institutions. Kalshi, the leader in global prediction markets with a 60% share and annual trading volume of over $50 billion, obtained $300 million from large venture capitalists Sequoia, Andreesen-Horwitz, A16z, and Paradigm. Interestingly, one of the best-performing stocks across all markets over the last few years is Robinhood, the online broker. When any entity suddenly finds a one-hundred-million-dollar run-rate business in less than a year, especially one with massive profit margins and what appears to be numerous growth avenues, investors react favorably. As the prediction entities have gained adoption, the largest publicly traded sports betting entities like FanDuel and DraftKings have seen their values drop dramatically. More problematic for my hometown of Las Vegas, the number of visitors traveling to our city is estimated to decline by 6% in 2025 (perhaps one would like to predict that in 2026?)
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Whenever there is a competitive alternative, incumbents will respond to protect their market share. FanDuel and DraftKings recently quit the American Gaming Association. The following week, both entities decided to offer prediction markets on their platforms (in partnership with the CME Group, the publicly traded futures exchange). Many of the publicly traded casino entities have also seen their values drop over the last year as live gaming is seen as a stagnant industry. From a regulatory standpoint, the oversight of prediction products has been left to the Commodities Futures Trading Commission (CFTC). Currently, it views the product as a financial derivative and not gambling. Anti-fraud and fair market practices are statutes that states are eyeing to ‘clarify’ the legal boundaries. In Congress, our on-the-ball representatives are increasingly noticing the issue as they attempt to pass a bill to prevent equity investment by its own members (The ex-madame speaker of the house has done well investing the last I remember). So how should investors view this whole situation?
The ability to weigh risk and reward is at the heart of investing and applicable to sports betting. However, betting and gambling are different. In gaming, there is a definite outcome, and the only thing one owns is the chance that one’s prediction, wager, hand, throw of the dice, or pull of the machine turns out correctly. When one invests, you own an entity that has assets and liabilities. In most cases, those assets and liabilities form operating businesses. The success of the entity to generate profits from its assets and then grow them determines the value of the underlying entity. From my perspective, and I have written this on numerous occasions, my preferred way to make money with casinos is to own equity of the casino. The principle can be applied to the custodians and exchanges, suppliers of gaming, and some underlying offshoot of both. Yes, Las Vegas and the casino industry are being challenged. It will be interesting to see how this evolves, and I certainly will be paying attention.