Prediction markets vs sportsbooks: what's the difference?
One is an exchange, the other is the house. Seven differences that matter for price, limits and where you can play.
Short answer: At a sportsbook, the company sets the odds and bets against you, building in a margin (the "vig"). On a prediction market, you trade contracts with other people at prices they set, and the platform charges a fee. Prediction markets like Kalshi and ProphetX are federally regulated exchanges available in many states where sportsbooks aren't, but their sports markets are being challenged in court by several states.
On this page
The 7 differences
| Sportsbook | Prediction market | |
|---|---|---|
| Who sets the price | The sportsbook | Other traders |
| Who you're up against | The house | Other users |
| How they earn | Margin built into odds | Trading fees |
| Winning players | Often limited or banned | Welcome, since they add liquidity |
| Sell before the end | Only "cash out" at the book's price | Sell anytime at the market price |
| Regulator | State gaming commissions | CFTC (federal), plus state disputes |
| Markets | Sports (plus some novelty) | Sports, economics, politics, weather, culture |
1. Price: margin vs fee
A sportsbook might price both sides of a coin-flip game at −110. That adds up to about 104.8%, so the house keeps roughly 4.5% of the money wagered over time. On an exchange, a 50/50 game might trade at 50¢/51¢, plus a fee. On popular markets that's often cheaper, though not always: compare the total cost.
2. Winners aren't limited
Sportsbooks can cut the stakes of customers who win consistently. Exchanges make money from volume, so they have no reason to limit winners.
3. You can exit anytime
On a prediction market, if the price moves your way you can sell your contracts at the market price. Sportsbook "cash out" offers are set by the book and usually include an extra margin.
4. Where they're legal
Sportsbooks are licensed state by state. CFTC-regulated prediction markets operate under federal rules, which is why they're available in states like California and Texas where sports betting isn't legal. Several states dispute this for sports contracts. See Are prediction markets legal?.
5. Parlays and props
Sportsbooks offer every kind of parlay and player prop. Prediction markets started with simple winners and totals but are adding more (combos, props) quickly. Sportsbooks still have more variety.
6. Promotions
Both offer welcome bonuses. Prediction market offers are usually "trade $X, get $Y". See current promo codes.
7. Taxes
Sportsbook winnings are gambling income. How event-contract profits are taxed is less settled. See prediction market taxes.
Which should you use?
- Want the best price on big games and the option to sell early? Try an exchange like ProphetX or Novig.
- Want politics, economics or culture too? Kalshi or Polymarket.
- Want every parlay and prop? A licensed sportsbook, if your state has one.
Frequently asked questions
Is Kalshi a sportsbook?
No. Kalshi is a CFTC-regulated exchange where users trade event contracts with each other. It doesn't set odds or take the other side of your trade.
Are prediction market prices better than sportsbook odds?
Often on popular events, because there's no built-in house margin, just a fee and the spread. On less popular markets the spread can be wide, so compare before you trade.
Can I use a prediction market in a state without legal sports betting?
In many cases, yes, because CFTC-regulated exchanges operate under federal rules. But some states are challenging sports contracts, so check what the app allows where you are.
