---
type: claim
domain: internet-finance
description: "Sports betting dominates prediction market volume (37-78% depending on platform and period), meaning the 'prediction market boom' is largely sports gambling repackaged — this weakens the claim that growth validates information aggregation mechanisms"
confidence: likely
source: "Messari (@0xWeiler Polymarket valuation, Mar 2026), Kalshi March Madness data, CertiK 2025 report"
created: 2026-03-26
secondary_domains: ["mechanisms"]
related: ["prediction-market-regulatory-legitimacy-creates-both-opportunity-and-existential-risk-for-decision-markets", "prediction-markets-are-spectator-sports-while-decision-markets-require-skin-in-the-game-creating-fundamentally-different-cold-start-dynamics", "prediction-market-boom-is-primarily-a-sports-gambling-boom-which-weakens-the-information-aggregation-narrative", "polymarket-kalshi-duopoly-emerging-as-dominant-us-prediction-market-structure-with-complementary-regulatory-models", "prediction-market-growth-builds-infrastructure-for-decision-markets-but-conversion-is-not-happening", "kalshi", "prediction-market-scale-exceeds-decision-market-scale-by-two-orders-of-magnitude-showing-pure-forecasting-dominates-governance-applications", "prediction-market-skin-in-the-game-mechanism-creates-dual-use-information-aggregation-and-gambling-addiction"]
reweave_edges: ["prediction-market-regulatory-legitimacy-creates-both-opportunity-and-existential-risk-for-decision-markets|related|2026-04-19", "prediction-markets-are-spectator-sports-while-decision-markets-require-skin-in-the-game-creating-fundamentally-different-cold-start-dynamics|related|2026-04-19"]
---

# The prediction market boom is primarily a sports gambling boom which weakens the information aggregation narrative

The headline numbers for prediction market growth ($63.5B in 2025, $200B+ annualized in 2026) obscure a critical composition fact: sports betting is the dominant category driving volume, ranging from 37% of Polymarket's February 2026 volume to 78.6% of Kalshi's volume during peak sports periods.

Kalshi's breakout moment — the $22B valuation — was catalyzed by March Madness. A single 4-day stretch generated $25.5M in fees, more than Kalshi's first 5 months of 2025 combined. The $3.4B weekly volume during March Madness week was driven by the same behavioral dynamics as DraftKings and FanDuel, not by novel information aggregation.

This matters for the futarchy thesis because the prediction market growth narrative is frequently cited as evidence that "markets aggregate information better than votes" — the core futarchy premise. But sports betting validates entertainment demand for probabilistic wagering, not the informational efficiency of conditional markets for governance decisions.

Polymarket's February 2026 category breakdown:
1. Sports: $3.0B (37%)
2. Crypto: $2.4B (30%) — primarily 5-min and 15-min up/down markets (gambling-adjacent)
3. Politics: $2.2B (28%)
4. Other: $342.8M (5%)

The "crypto" category is notable: 5-minute and 15-minute up/down markets are functionally binary options on price movement, not information aggregation about real-world events. Combined with sports, ~67% of Polymarket volume is gambling-adjacent.

The 5% "other" category — which includes science, technology, economics, and the kinds of questions that most resemble governance decisions — grew 1,637% YoY but remains a rounding error in absolute terms. This is where information aggregation actually happens, and it's negligible relative to total volume.

The counter-argument: sports betting still demonstrates that conditional market infrastructure works at scale, price discovery mechanisms function under high volume, and users will provide liquidity when incentives are clear. These are necessary conditions for decision markets even if the use case is different. The mechanism is validated even if the application isn't.

## Evidence

- Polymarket February 2026: Sports 37%, Crypto 30%, Politics 28%, Other 5%
- Kalshi: Sports at 78.6% of volume during peak weeks (January 2026 NFL playoffs)
- Kalshi March Madness week: $3.4B volume, $33.1M fees
- Kalshi March Madness 4-day stretch: $25.5M in fees (more than first 5 months of 2025)
- CertiK: Technology & Science markets grew 1,637% YoY but remain tiny in absolute terms
- Crypto "up/down" markets: 5-min and 15-min resolution windows — functionally binary options
- US sportsbook volume: $166.9B in 2025 — prediction markets are converging with this market, not creating a new one

challenged_by: The counter-argument that infrastructure validation transfers even when use cases differ. Sports betting proves the conditional market mechanism works at scale — the question is whether that's sufficient for futarchy adoption or whether governance requires fundamentally different market structures.

---

Relevant Notes:
- [[prediction-market-growth-builds-infrastructure-for-decision-markets-but-conversion-is-not-happening]] — companion claim about the non-conversion
- [[Polymarket vindicated prediction markets over polling in 2024 US election]] — the 2024 election was the one prediction market event that DID demonstrate information aggregation over entertainment
- [[speculative markets aggregate information through incentive and selection effects not wisdom of crowds]] — the theoretical mechanism; sports betting validates selection effects (skilled bettors win) but not information aggregation per se
- [[prediction-market-scale-exceeds-decision-market-scale-by-two-orders-of-magnitude-showing-pure-forecasting-dominates-governance-applications]] — scale gap partially explained by sports gambling driving prediction market numbers

Topics:
- domains/internet-finance/_map
- core/mechanisms/_map

## Supporting Evidence

**Source:** Bloomberg Law, April 17, 2026

Nevada characterized sports event contracts as functionally identical to sportsbooks in Ninth Circuit arguments. The Masters golf market alone reached $460M in April 2026, demonstrating massive sports betting volume. This framing was persuasive to the panel—all three judges showed skepticism toward distinguishing prediction markets from gambling.


## Supporting Evidence

**Source:** Norton Rose Fulbright ANPRM analysis, state gaming commission submissions

State gaming commissions' ANPRM comments cite that during NFL season, approximately 90% of Kalshi contracts involved sports, making the 'derivatives not gambling' distinction hard to maintain. American Gaming Association data shows $600M+ in state tax revenue losses attributed to prediction market sports betting. Arizona filed first-ever criminal charges March 17; eleven states with enforcement actions. This empirical evidence from regulatory filings confirms the sports gambling dominance pattern.


## Supporting Evidence

**Source:** Curtis-Schiff Prediction Markets Are Gambling Act scope provisions

Legislative focus on sports contracts specifically (Curtis-Schiff bill targets 'sports and casino-style products') confirms that the regulatory threat is concentrated on gambling-adjacent prediction markets, not information aggregation use cases


## Supporting Evidence

**Source:** Norton Rose Fulbright ANPRM analysis, April 2026

State gaming commissions submitted ANPRM comments citing that during NFL season, approximately 90% of Kalshi contracts involved sports, making the 'derivatives not gambling' distinction hard to maintain. American Gaming Association data shows $600M+ in state tax revenue losses attributed to prediction market sports betting. Arizona filed first-ever criminal charges against prediction market operators on March 17, 2026. Eleven states have active enforcement actions. The ANPRM comment surge after April 2 (from 19 to 800+ submissions) coincided with CFTC suing three states, raising public visibility of sports betting controversy.


## Supporting Evidence

**Source:** Norton Rose Fulbright ANPRM analysis, April 2026

State gaming commissions' ANPRM comments cite that 'during NFL season, ~90% of Kalshi contracts involved sports — makes derivatives not gambling distinction hard to maintain.' This provides specific quantitative evidence that prediction market volume is dominated by sports betting, not information aggregation markets.


## Supporting Evidence

**Source:** Bloomberg Law, April 17, 2026

Total prediction market trading volume exceeded $6.5 billion in the first two weeks of April 2026. The Masters golf market alone reached $460M. This scale of sports betting volume dwarfs governance and policy markets, confirming the sports gambling dominance pattern.


## Supporting Evidence

**Source:** Norton Rose Fulbright ANPRM analysis, April 21 2026

State gaming commissions' core arguments in ANPRM comments cite '$600M+ in state tax revenue losses (American Gaming Association data)' and note that 'During NFL season, ~90% of Kalshi contracts involved sports — makes derivatives not gambling distinction hard to maintain.' This provides specific quantification of the sports dominance claim and shows state regulators are using this data to challenge the information aggregation narrative in formal regulatory proceedings.


## Supporting Evidence

**Source:** Norton Rose Fulbright ANPRM analysis, state gaming commission comments

State gaming commissions' comment submissions cite that 'During NFL season, ~90% of Kalshi contracts involved sports — makes derivatives not gambling distinction hard to maintain.' This provides specific quantitative evidence that prediction market growth is dominated by sports betting, not information aggregation use cases.


## Supporting Evidence

**Source:** CNN Politics 2026-04-26, CFTC enforcement priorities

CFTC's enforcement priorities list 'insider trading in prediction markets' as priority #1 and 'market manipulation in energy markets' as priority #2, with no mention of governance markets or decision markets. This confirms the agency views prediction markets primarily through the lens of sports/event betting and traditional commodity derivatives, not information aggregation or governance innovation.


## Supporting Evidence

**Source:** CNBC/Bank of America, April 2026

Bank of America data cited by CNBC shows sports make up approximately 90% of Kalshi's trading volume as of April 2026, making the sports event contract question 'existentially important for Kalshi's business.' This confirms sports gambling, not information aggregation, drives prediction market adoption.
