Prediction markets have grown rapidly over the past year, forcing the traditional sports betting industry to pay attention. Brad Allen has watched that shift closely from his role at research firm Eilers & Krejcik, where he analyzes the industry and regularly speaks with operators and market makers.
Allen joined Trade Handle for an exclusive interview to discuss what changed his mind about prediction markets, how DraftKings could benefit from entering the space, why he expects consolidation, and where newer exchanges may still have pricing opportunities. He also explained why the long-term challenge may have less to do with attracting traders and more to do with keeping them.
Watch Our Exclusive Interview With Brad Allen
Allen discussed the rapidly changing relationship between prediction markets and traditional sports platforms. Allen came into the industry with roughly a decade of experience covering the broader gaming sector and has spent the past four years at Eilers & Krejcik.
His European background initially made him skeptical of the prediction-market boom. Exchanges have existed overseas for years without becoming the dominant sports product, so Allen wasn't immediately convinced the U.S. version would be different.
Kalshi's Growth Changed Allen's Perspective
The turning point came as Kalshi's valuation climbed while publicly traded sports companies were moving in the opposite direction. Allen said seeing Kalshi become more valuable than some established names made it increasingly difficult to dismiss prediction markets as a niche product.
"When Flutter and DraftKings became worth less than Kalshi, that was when a lot of people realized, 'This is where the money is now; the balance of power has flipped,'" Allen told us.
The World Cup provided another important test. Allen pointed to the sustained daily trading activity during the tournament as evidence that prediction markets could handle significantly larger sports volume than they had previously demonstrated.
DraftKings Could Turn Disruption Into an Opportunity
Traditional sports companies might appear to have the most to lose from prediction markets, but Allen's research suggests the picture is more complicated. He said company reporting and Eilers & Krejcik's own tracking have shown relatively limited cannibalization of existing sports activity so far.
At the same time, prediction markets can give companies access to customers in states where their traditional sports products aren't available. Allen pointed to DraftKings as an especially interesting example, saying its exchange quickly moved near the top of the U.S. market after it began directing more activity toward the product.
That creates a potential two-sided opportunity. DraftKings can continue operating its established business where available while using prediction markets to reach customers in additional states.
Allen Expects a Much Smaller Group of Winners
More platforms are entering prediction markets, but Allen doesn't expect all of them to survive. Exchanges depend heavily on liquidity, making it hard for dozens of platforms offering similar contracts to maintain meaningful activity at the same time.
Allen expects the eventual market to look something like this:
- A small number of major exchanges capturing most activity
- Kalshi remaining among the significant players
- Established consumer brands using distribution as an advantage
- Smaller exchanges struggling without enough liquidity
- Market makers becoming increasingly important as platforms mature
"With exchanges, you'll probably end up with three or four key players," Allen said.
His comments echo something we've heard repeatedly during Trade Handle interviews. More prediction-market brands don't necessarily mean more independent exchanges, particularly as companies can route contracts through existing infrastructure.
Prediction Markets Have a Simplicity Advantage
Allen sees an interesting product difference between prediction markets and traditional sports platforms. Established sports apps have spent years adding promotions, combinations, rewards, and increasingly complicated menus, while prediction markets can present a much simpler proposition to a new user.
A market showing one team with a 55% implied probability can be easier for a beginner to understand than navigating dozens of different sports products. Allen also believes prediction platforms have done a good job incorporating social elements such as comments and community discussion.
The trade-off comes with retention. Traditional operators have many tools to bring customers back after a poor experience, while the economics of an exchange make similar incentives harder to offer.
Retaining Recreational Traders Could Be the Hard Part
Allen remains somewhat cautious about what happens after the current growth phase. Peer-to-peer products naturally create winners and losers, and experienced participants can become increasingly efficient at finding advantages over recreational traders.
That raises a question the industry hasn't fully answered yet: What keeps casual traders coming back over several years?
Allen believes the initial excitement surrounding prediction markets can drive enormous activity, but long-term retention will become increasingly important as the industry matures. Exchanges will need to create an experience people enjoy even when they aren't consistently coming out ahead.
New Markets May Still Have Pricing Holes
Allen's advice for new traders was one of the more interesting parts of our conversation. Rather than suggesting they compete in the most established markets, he pointed to newer, more complicated sports products where pricing systems are still developing.
"If you poke around deeper NFL combos and SGPs on exchanges and compare them to FanDuel's [pricing], you might find pricing errors or holes in the correlations," Allen said.
His reasoning is straightforward. Traditional sports companies have spent years refining how they price correlated outcomes, while some prediction-market participants are still learning those relationships. "While it's new, it's not settled, so there might be holes," Allen said.
The Trade Handle Prediction Markets Take
Allen's perspective is interesting because he isn't approaching prediction markets as someone who always believed they would transform the industry. He started skeptical, watched the numbers change, and adjusted his view as the market became too large to dismiss.
The next phase could be considerably different from the first. Launching an exchange is one challenge, while creating liquidity, retaining recreational traders, and competing against companies with enormous existing audiences is another.
We also think his point about immature pricing deserves attention. Prediction markets are developing incredibly quickly, but that doesn't mean every corner of the product has already become efficient. For traders willing to research the details, the industry's growing pains may occasionally create opportunities.