Prediction markets and sports betting both let you put money on future outcomes, but they work differently. In prediction markets, traders set prices and trade against each other. In sports betting, a book sets the line and takes the other side. This guide lays out the main differences so you can see how each fits regulation, pricing, and purpose.
Who Sets the Odds
Sports betting: A bookmaker (the “house”) sets the opening line and adjusts it to balance action and manage risk. You bet against the house. The house’s goal is to make a profit regardless of the outcome (via the vig or overround).
Prediction markets: Traders set the odds by buying and selling. You trade against other participants. The platform typically doesn’t take a position—it matches orders and may charge fees. Prices reflect supply and demand, not a book’s risk management.
So: in sports betting the house is the counterparty; in prediction markets the counterparty is other traders.
Where the Money Goes
Sports betting: When you lose, the house keeps the stake (minus payouts to winners). The house’s edge is built into the odds (e.g. -110 on both sides). Over time, the house expects to profit from the vig.
Prediction markets: When you lose, the counterparty (another trader) wins. Money moves between participants. The platform earns from fees (and sometimes from spread or order flow), not from taking the opposite side of your bet.
So: in sports betting the house is a principal; in prediction markets the platform is usually a facilitator.
How Prices Are Quoted
Sports betting: Odds are quoted in American (+200, -150), decimal (3.00, 1.67), or fractional (2/1, 2/3) format. You have to convert to implied probability. The sum of implied probabilities across all outcomes is often above 100% (the overround).
Prediction markets: Binary markets usually quote in price-per-contract from $0.01 to $0.99. Price in cents is the implied probability. Yes + No typically sum to about $1.00 (or slightly less after fees). No conversion needed for probability.
So: prediction markets show probability directly; sportsbooks show odds that embed the house edge.
Regulation and Legality
Sports betting: In the U.S., legal status is state-by-state. Many states have legalized sportsbooks; others have not. Offshore books operate in a gray area. Regulation focuses on consumer protection, integrity, and tax.
Prediction markets: In the U.S., some platforms (e.g. Kalshi) are regulated by the CFTC as derivatives or event contracts. Others may restrict U.S. users or use different legal structures. Regulation turns on whether the product is treated as gambling, a derivative, or something else.
Legality depends on where you are and which platform you use. Always check your jurisdiction and the platform’s terms.
Purpose: Forecasting vs Entertainment
Sports betting: Often framed as entertainment. Many users bet for fun, on games they watch. Books offer promos, parlays, and live betting to maximize engagement. Accuracy of odds is secondary to volume and margin.
Prediction markets: Often used for forecasting—elections, macro, crypto, policy. Researchers, institutions, and individuals use them to hedge risk or express a view. Accuracy of prices matters because participants rely on them for information and risk transfer.
That’s a tendency, not a rule: you can use prediction markets for entertainment and sports betting for serious risk-taking. But the typical use case and product design differ.
Can You Trade Both?
Yes. Many people use sportsbooks for sports and prediction markets for politics, economics, or crypto. The skills overlap (reading odds, sizing, discipline) but the mechanics differ (order types, settlement, regulation).
If you’re used to sportsbook odds, treat prediction market prices as probabilities: $0.60 = 60%. If you’re used to prediction markets, sportsbook odds are the same idea with an extra layer (vig) and different formatting.
Summary Table
| Aspect | Sports betting | Prediction markets |
|---|---|---|
| Who sets odds | Bookmaker (house) | Traders (supply and demand) |
| Your counterparty | The house | Other traders |
| Platform’s role | Principal (takes the other side) | Facilitator (matches orders, may charge fees) |
| Price format | American, decimal, fractional | Usually $0.01–$0.99 (price = probability) |
| Overround / vig | Yes (built into odds) | Typically minimal (Yes + No ≈ $1) |
| Typical use | Entertainment, sports | Forecasting, hedging, trading |
| U.S. regulation | State-by-state for sportsbooks | CFTC for regulated event contracts; others vary |
Bottom Line
Prediction markets and sports betting both involve putting money on future events, but prediction markets are peer-to-peer, probability-based, and often used for forecasting; sports betting is house-versus-customer, vig-based, and often used for entertainment. Neither is “better” in the abstract—they serve different goals. Choose based on what you want to trade, how you want to trade it, and what’s legal where you are.