Market Pricing
The contract price is set by the market and reflects the combined expectations of participants.
Trend #3 · Prediction Markets · 2027
Event markets are becoming a new forecasting infrastructure
Prediction markets are moving into the mainstream. For the betting industry, they are a new product format, a new competitor and a new regulatory question: where does the derivatives market end and sports betting begin?
Executive Summary
A prediction market is not simply another way to place a bet. It is an exchange model for pricing event outcomes.
Liquidity
Product quality depends on market depth, spreads, market makers and the ability to exit a position.
Regulatory Split
In the US, event contracts are developing within the federal derivatives framework while facing challenges from individual states.
Strategic Choice
For sportsbook companies, the 2027 question is whether to compete, integrate, act as an intermediary or build their own infrastructure.
Why Now
From experiment to a market of its own
Rising volumes, more contracts and new entrants have made prediction markets a strategic issue for betting companies.
$40B+
2025 volumeCombined trading volume for Kalshi and Polymarket in 2025, according to KPMG.
KPMG · 2026$25.7B
One monthMonthly notional trading on prediction markets in March 2026, according to KPMG.
KPMG · 2026~1,600
Event contractsEvent-contract listings in 2025, versus fewer than 150 a year from 2021 to 2024.
KPMG Regulatory Insights · 20262026
Rulemaking cycleThe CFTC launched a new consultation and rulemaking cycle around prediction markets and event contracts.
CFTC · 2026How It Works
Five steps from question to settlement
The basic mechanics are straightforward: the market trades a contract on an event outcome, the price moves with participants’ expectations, and settlement follows once the outcome is known.
Question
A clearly resolvable question is defined: will the event happen or not?
Contract
A participant buys a YES or NO position at a price that moves with the market.
YES64¢
NO36¢
Trading
The position can be bought or sold before settlement; its price changes with new information and demand.
Resolution
After the event, the contract is resolved using a predefined settlement source and resolution rules.
Settlement
The contract closes according to its specification. A precise settlement methodology is one of the foundations of market integrity.
Prediction Market vs Sportsbook
Similar user intent, different market mechanics
The overlap is most visible in sports event contracts, where the customer sees something close to a traditional bet even though the infrastructure and regulatory framework may be different.
Attribute
Sportsbook
Prediction Market
Price
Operator odds
Market price
Counterparty
Operator / house
Other participants through the market
Economics
Margin / hold
Trading / transaction fees
Liquidity
Risk managed by the operator
Depends on order flow and market makers
Exit before the event
Cash-out is a product feature
Trading the position is a core mechanic
US regulation
Primarily state gaming frameworks
Federal derivatives framework for CFTC-registered markets; federal-state disputes continue
Product model
Bet selection
Portfolio / market position
Market Map
Prediction markets extend far beyond sports
The breadth of categories is what makes the format interesting: one market-infrastructure layer can support very different types of events.
SP
Sports
Match outcomes, totals, spreads, player statistics, futures and multi-event contracts.
POL
Politics
Elections, control of legislative chambers, nominations and other events with a defined outcome.
EC
Economics
Central-bank decisions, macroeconomic indicators and economic events.
ENT
Entertainment
Awards, media charts and cultural events where the result can be objectively verified.
FIN
Companies & Markets
Corporate events, financial milestones and market indicators where the product structure is permitted.
NEW
New Event Classes
The key question for 2027 is which new categories can pass product review and regulatory scrutiny.
U.S. Regulatory Timeline
2026 became a year of regulatory reset
The regulatory picture remains fluid. These are the main federal steps shaping the context for 2027.
04.02.26
CFTC withdrew its 2024 rule proposal
The Commission withdrew its previous event-contract proposal and said it intended to build a new framework.
Policy reset12.03.26
Prediction Markets Advisory
The Division of Market Oversight reminded DCMs of core principles, product-submission requirements, market surveillance and considerations specific to sports-related contracts.
DCM obligations16.03.26
Advance Notice of Proposed Rulemaking
The CFTC requested comments on prediction markets, the public interest, event contracts, inside information and related issues.
ANPR10.06.26
New NPRM on enumerated activities
A structured process was proposed for evaluating contracts involving gaming and other activities enumerated in law.
Rulemaking24.07.26
Self-certification requirements
CFTC staff separately stressed the quality of contract specifications, settlement methodology, data sources and product documentation.
Product governance12.08.26
Market-maker and incentive programs
A new advisory focused on self-certification requirements for liquidity, market-making and trading-incentive programmes.
Liquidity governanceSports Event Contracts
Why sports became the point where the two models collide
Sports event contracts make the distinction between a sportsbook and a prediction market especially visible: user journeys are converging faster than regulatory regimes.
Sportsbook
- Fixed odds / operator pricing
- State gaming licensing
- Operator-managed risk book
- Bonuses & gaming CRM
- Responsible gaming rules
↔PRODUCT
OVERLAP
OVERLAP
Event Market
- Exchange-style price discovery
- Federal derivatives framework for DCM products
- Order book & liquidity
- Trade in / trade out
- Market surveillance & core principles
Strategic Entry Models
How a betting company can enter prediction markets
Not every company needs to build its own exchange. The right route depends on the level of control required, regulatory appetite, capital and time to market.
Distribution / Partnership
Connect to existing infrastructure with limited control over contracts.
- Lower regulatory burden
- Faster time to market
- Partner dependency
- Limited fee capture
Test product-market fit
Suitable for companies that want to test demand, UX and cross-sell before building a full exchange stack.
Introducing Broker
The brand becomes the interface between the customer and registered market infrastructure.
- More control over distribution
- Registration requirements
- No full control over listings
- Fee-based model
Distribution without exchange ownership
A compromise between speed to market and the ability to shape the product independently.
Futures Commission Merchant
A deeper role in customer infrastructure and intermediation, but with substantially greater compliance overhead.
- Customer funds
- Clearing connectivity
- Operational controls
- Higher compliance burden
More economics, more responsibility
This model requires strong operational maturity and a capable risk function.
Designated Contract Market
Owning exchange infrastructure gives control over contract design, pricing architecture, data and market rules.
- Product ownership
- Market surveillance
- Self-regulatory duties
- Long regulatory path
Highest strategic value — and the highest barrier
This is no longer an add-on betting product; it is a regulated market business in its own right.
Clearing Infrastructure
Control of the clearing and settlement layer can form part of a fully vertically integrated model.
- Settlement control
- Risk management
- Capital requirements
- System resilience
Infrastructure play
The most demanding route for companies that want to own not only the interface but also critical market infrastructure.
The Real Moat
The core product of a prediction market is liquidity
A polished interface can be copied. A deep market is harder to replicate. The tighter the spread, deeper the book and more reliable the execution, the more useful the market price and the stronger the product.
01Market Makers
02Incentives
03Order Flow
04Tight Spreads
05Better Markets
Market Integrity
A prediction market only has value while the market can be trusted
As prediction markets grow, surveillance, inside information, settlement integrity and conflicts management move to the centre of the operating model.
Inside Information
Controls need to identify trading by people who can directly or indirectly influence an outcome or who hold material non-public information.
Manipulation
Market surveillance needs to account for spoofing, coordinated trading and other forms of price-discovery manipulation.
Settlement
The result source, fallback rules and treatment of disputed events should be defined before trading begins.
Conflicts
Market makers, affiliates, event participants and platform operators require clear access, disclosure and control rules.
Product & UX
From odds to a probability price
A prediction market changes more than the back end. It changes the customer’s mental model: instead of selecting a bet, the user holds a market position that can be opened, increased, reduced or closed.
Prediction MarketLive
Sports · Championship
Will Team X win the championship?
64¢ YES
Best bid63¢
Best ask64¢
Volume$2.4M
SettlementOfficial result
Price becomes the primary probability interface
64¢ is easy to read as a market-implied probability of roughly 64%, although the actual price also reflects market structure, fees and liquidity.
The customer manages a position
The experience is closer to trading: a user can enter at one price and exit before settlement at another.
Content is organised around questions
A “What will happen?” navigation model creates a different discovery layer from a traditional sportsbook organised around leagues and matches.
From bet slip to portfolio
Instead of a collection of independent bets, the product can show positions, unrealised P&L and exposure by theme.
Economics
Where economic value is created
Prediction-market economics differ from a traditional sportsbook. Comparing GGR and trading volume alone is not enough.
F
Fees
Transaction, trading and clearing fees can become the primary monetisation model for an exchange.
L
Liquidity
Market depth affects spreads, execution, retention and the ability to scale new contracts.
D
Data
Market prices create an information layer that can be valuable for media, research and B2B distribution.
X
Cross-Sell
For established consumer brands, prediction products can become a new engagement layer, but they require careful compliance design.
Risk Matrix
Key risks for a 2027 strategy
The hardest prediction-market risks sit at the intersection of regulation, market integrity, liquidity and consumer protection.
| Risk | Level | Why it matters | What to control |
|---|---|---|---|
| Regulatory uncertainty | High | Federal rules continue to evolve; individual states are challenging some sports products. | Jurisdiction, legal strategy, product approvals |
| Market integrity | High | Inside information and the ability to influence outcomes can undermine confidence in the market. | Surveillance, access controls, investigations |
| Liquidity | High | Without sufficient market depth, the user experience deteriorates quickly. | Market makers, incentives, spreads, depth |
| Settlement disputes | Medium | An ambiguous outcome becomes an operational and reputational risk. | Terms, data sources, fallback rules |
| Consumer protection | High | Customers may perceive sports contracts in much the same way as betting. | Disclosures, suitability, responsible-use controls |
| Tax & reporting | Medium | Event-contract classification affects reporting and customer experience. | Tax treatment, statements, withholding |
2027 Scenarios
Three market scenarios
These are Betting Trends editorial scenarios, not probability forecasts. The actual market may combine elements of all three.
Coexistence
Sportsbooks and prediction markets remain parallel categories with different audiences and regulatory perimeters.
- Different UX models
- Partial audience overlap
- Partnerships rather than direct competition
Convergence
Large consumer brands begin to offer both formats, while sportsbook and market-trading interfaces gradually converge.
- Shared accounts
- Cross-sell
- Unified sports discovery
Regulatory Split
Federal-state conflicts produce a clearer boundary between permitted event markets and gaming-like products.
- Product-by-product scrutiny
- Regional differences
- Higher compliance cost
Board Questions
Seven questions before entering prediction markets
The strategic decision should start not with “how quickly can we launch?” but with the role prediction markets are meant to play in the business portfolio.
01
Are we building a new regulated business or simply a new distribution channel?
Strategy02
How much product control do we actually need?
Product03
Where will liquidity come from — and who provides it?
Market04
How does our regulatory perimeter change in each jurisdiction?
Legal05
What surveillance and insider controls will be required?
Integrity06
How will we explain the difference between a trade and a bet to customers?
UX07
How do prediction markets affect the brand’s responsible-use framework?
ConsumerRelated Trends
Further research
Sources & Methodology
Sources and methodology
Factual data is kept separate from editorial scenarios. Regulatory information reflects the sources available as of 11 September 2026 and may change.
CFTC
Prediction Markets Advisory
DCM obligations, core principles, product listings and sports-related event contracts.
CFTC
Event Contracts Rulemaking 2026
NPRM on contracts involving enumerated activities, including gaming.
KPMG
Prediction Markets: Paths to Entry
Market volumes, entry models, DCM/IB/FCM routes and strategic trade-offs.
KPMG
Prediction Markets: CFTC Advisory and ANPR
Growth in event-contract listings and the regulatory context.
CFTC
Prediction Markets Enforcement Advisory
Enforcement practice involving misuse of non-public information and fraud.