By Katherine Sayre and Jared Diamond
The Super Bowl is the biggest sports-betting event of the year, with Americans expected to set a record by wagering more than $1.5 billion on the big game.
Now, for the first time, nearly everyone in the U.S. will be able to get in on the action. That's thanks to a rivalry as bitter as any on the field.
Prediction-market companies Polymarket and Kalshi are challenging FanDuel and DraftKings, who popularized and dominated online sports betting over the past eight years. Prediction markets have used a legal loophole that permits wagering on sports outcomes everywhere.
California, Texas and nine other states haven't legalized sports betting. But prediction markets -- which are regulated federally -- allow a way in. Prediction markets let users bet on the outcome of events in many fields, from the economy and politics to sports.
Kalshi and Polymarket, the biggest prediction-market platforms, have attracted attention for offering outlandish bets such as whether the Trump administration will buy Greenland, the sales units for A$AP Rocky's new album or what MrBeast will say in his next video.
But sports remain the overwhelming majority of their business, giving a sports-betting-crazed nation a new way to participate in America's favorite new pastime.
Sports betting is huge and growing. Americans placed nearly $151 billion in bets through November last year, according to data compiled by the American Gaming Association, an industry trade group. Traditional gambling companies such as DraftKings and FanDuel took in $15 billion in revenue in that period, easily surpassing the $13.8 billion for all of 2024.
DraftKings and FanDuel launched prediction markets last month, including in states that outlaw sports betting.
FanDuel Chief Executive Amy Howe says predictions give the company access to more Americans while the company keeps pushing for the legalization of traditional sports betting in more states.
"The aspiration is still to legalize as much of the United States as we can -- that is the North Star," Howe says.
Sports betting took off in the U.S. after the Supreme Court issued a ruling in 2018 that cleared the way for states to legalize sports wagering.
Gambling has historically been regulated at the state level. Dozens of state regulators and attorneys general have said in court filings that Kalshi is flouting the law by operating without state gambling licenses, a legal fight that is expected to eventually reach the Supreme Court as well.
New York-based FanDuel and Boston-based DraftKings both started as daily fantasy-sports platforms, in 2009 and 2012, respectively. The companies have about 80% of the sports-betting market. FanDuel's parent company, Flutter Entertainment, has a $31 billion market capitalization, while DraftKings' market cap is $15 billion.
The prediction markets are newer on the scene. Polymarket, a popular crypto-trading platform, started in 2020. Kalshi was founded in 2018 by two MIT graduates.
Prediction-market companies can make money as long as there is plenty of trading volume. They collect fees when users buy or sell. There is no house to beat, per se.
In contrast, sportsbooks such as DraftKings and FanDuel set the odds on games and player performances and make money from losing bets.
Some regulators say prediction markets are skirting sports-betting laws, which can call for licensing reviews, addressing gambling addiction and monitoring for fraud. Most states with sports betting have set a minimum age of 21, while prediction markets allow users as young as 18.
Kalshi says its business is regulated by the Commodity Futures Trading Commission and not subject to state gambling authorities. "We use a variety of tools before and after people trade to prevent illegal trading and bring enforcement action when violations happen," a company spokesperson said.
Polymarket has a data partnership with Dow Jones, the publisher of The Wall Street Journal.
FanDuel and DraftKings need to figure out how to cut into Kalshi and Polymarket's head start on prediction markets without running afoul of state regulators who hold the keys to their sports-betting licenses.
"It's not a competitive product with the traditional online sports betting product at this point," DraftKings CEO Jason Robins says of prediction markets. "But I can understand why, for a state, they would feel like it could be a threat to that and they wouldn't like it."
The American Gaming Association has joined the opposition to prediction markets, hiring former New Jersey Gov. Chris Christie as a strategic adviser on the issue. Christie helped lead the litigation that led to the pivotal 2018 Supreme Court decision. The ruling struck down a 1992 federal law that prohibited most states from allowing gambling on sports.
"Calling it predictive markets never fooled me," Christie says. "It's a bet. That's what it is, and it doesn't look or feel any different than that."
DraftKings and FanDuel quit as members of the association in November.
DraftKings and FanDuel abandoned their efforts to become licensed in Nevada last year. State gambling regulators there said the companies' interest in prediction markets was incompatible with a gambling license in the state.
Sports leagues are also expressing concern about the rise of prediction markets, saying they pose a risk to the integrity of competition. Traditional sports betting requires sportsbooks to share betting data with state regulators and the leagues, giving them a better chance of catching bad actors.
NCAA President Charlie Baker earlier this month sent a letter to the CFTC urging the commission to suspend college-sport prediction markets "until a more robust system with appropriate safeguards is in place." Regulations should include advertising restrictions, integrity protections and involvement with sports governing bodies including the NCAA, he said.
"Let's face it -- college sports prediction markets are sports betting," Baker told the Journal, "and targeting states that haven't legalized sports betting is creating a massive risk to the integrity of the game and to student-athletes."
In written testimony to the House Committee on Agriculture in December, National Football League Executive Vice President Jeff Miller said the league was "particularly troubled" that prediction markets exist in states where gambling isn't legal.
"In each of these state-regulated markets, regulators and state legislators closely monitor betting activity and, with input from professional sports leagues, can determine which bets and wager levels are acceptable," Miller wrote. "Those guardrails do not exist in prediction markets."
Professional hockey has taken a different approach. While all four of the major American pro leagues have sportsbook partners, only the National Hockey League has entered into similar deals with prediction markets. In October, the NHL announced that it had entered into agreements that made Kalshi and Polymarket the league's official prediction market partners.
Keith Wachtel, who oversees the NHL's business operations, said that aligning with prediction markets enabled the league to influence which contracts are available on Kalshi and Polymarket and have better integrity protections on those platforms.
"If you're part of it," Wachtel said, "then you have the ability to control and monitor more effectively."
All of this comes at a time when professional and college sports have been roiled by a string of gambling scandals that have drawn the attention of law enforcement and threaten to erode fan trust.
In October, federal prosecutors in New York charged Portland Trail Blazers head coach Chauncey Billups and Miami Heat guard Terry Rozier as part of a sweeping investigation into gambling, rigged poker games and match-fixing. Both have pleaded not guilty.
Weeks later, the same U.S. attorney's office charged Cleveland Guardians pitchers Luis Ortiz and Emmanuel Clase with fraud. Ortiz and Clase allegedly agreed in advance to throw specific pitches at certain moments, allowing their co-conspirators to place bets with inside knowledge. They have denied the charges.
Write to Katherine Sayre at katherine.sayre@wsj.com and Jared Diamond at jared.diamond@wsj.com
(END) Dow Jones Newswires
January 23, 2026 21:34 ET (02:34 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
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