35% of Bettors Are Abandoning Sportsbooks for Prediction Markets

Thirty-five percent of American bettors say they are using traditional sportsbooks less because of prediction markets. That figure comes from a survey of more than 1,000 US consumers conducted in September by the behavioral data company Fullstory, and it lands at a moment when DraftKings and FanDuel are watching a new competitor exploit a loophole they once used themselves.

Sixty percent of bettors told Fullstory that prediction markets have changed how often they use sportsbooks. The damage to incumbents may already be measured in tax dollars: the American Gaming Association estimates prediction markets have diverted more than $500 million in potential sports-betting tax revenue away from states.

The history matters here. In 2006, Congress passed the Unlawful Internet Gambling Enforcement Act, which banned banks from processing payments for online betting but carved out an exception for fantasy sports, on the theory that fantasy was a game of skill rather than chance. At the time, "fantasy sports" meant a season-long league among friends. DraftKings and FanDuel took that exception and built something Congress never pictured: contests with same-day entry and payouts, repeated all season long. They argued it was still fantasy sports under the 2006 law, just faster. For years, regulators mostly let it slide.

Then in 2015, New York's attorney general called daily fantasy sports "a massive, multi-billion-dollar scheme intended to evade the law and fleece sports fans across the country" and ordered both companies to stop taking bets from state residents. Massachusetts chose regulation over prohibition and restricted play to adults 21 and older. Within a couple of years, most states had written daily fantasy into their gambling laws, slowing the companies' expansion.

Now the roles have reversed. Kalshi and Polymarket pitch their products as "commodities futures, not gambling" — contracts on sports outcomes regulated by the CFTC, the same federal agency that oversees oil and wheat futures, rather than individual state gaming boards. That structure means prediction markets need no state sportsbook license and pay no state betting tax.

The economic consequences are substantial. Americans legally wagered $166.94 billion on sports in 2025, generating $3.71 billion in state tax revenue. But the true size of the wagering habit likely exceeds official figures by tens of billions once prediction markets are counted. Economist Victor Matheson told Fortune the real total likely stands at $50 billion to $100 billion — money invisible to state regulators because prediction markets aren't classified as gambling.

States are fighting back, with mixed results. Illinois imposed a 15% tax on prediction-market sports contracts; Kalshi sued, arguing the state has no authority over a federally regulated product. Similar fights are underway in Nevada, New Jersey, and Maryland.

Fullstory's survey points to why bettors are switching, and it isn't mainly about odds. Trust and reputation (60%) and ease of use (59%) beat potential payouts or odds (51%) as the top reasons people pick a platform, and 77% of respondents said they have switched gaming platforms entirely over the user experience alone.

"Our research suggests that prediction markets are changing betting behavior, with more types of events to predict, greater transparency around outcomes and pricing, and an easier or more intuitive experience as top reasons why consumers would consider a prediction market over a sportsbook," Jason Wolf, president of Fullstory, told Fortune. "That should be a wake-up call for traditional sportsbooks."

The shift is not yet total. Sports remain the most popular betting category even among prediction-market users, and a quarter of respondents said they use both kinds of platforms, simply for different events.

"The biggest threat prediction markets pose to sportsbooks may not be that consumers stop betting on sports," Wolf said. "It's that they reset consumers' expectations for what a betting experience should look like. Once consumers become accustomed to more choice, greater transparency, and intuitive digital experiences elsewhere, they'll bring those expectations to every platform they use."