Prediction Markets vs Sportsbooks: Key Differences Explained

The basic differences of prediction markets vs sportsbooks

Prediction markets are a relatively new phenomenon and lots of people are still getting to grips with how it works. So before you make the mistake of trying to ‘bet’ on those sports prediction markets, here are the key things to understand:

Prediction markets doesn’t feature any form of gambling, and you won’t be betting on any odds.
Instead, you will be buying and selling contracts for a range of future events.
Such events can cover anything from sports, entertainment and politics through to economics, cryptocurrencies, the weather and much more.
The price of the contracts that you trade is set by the public, not the prediction markets site. This means that you will be trading against other customers, not the prediction markets brand itself.
There is no betting margin to factor in, although you will commonly find a commission fees that are inserted into the value of each trade you make.

Key terminology of forecasting markets vs sportsbooks

Go to most prediction markets sites and you’ll find that they use a different kind of terminology compared to what you get at an online sportsbook. Here are some of the most striking differences:

Prediction market language	Sports betting language
Probabilities	Odds
Prediction, trade and purchase	Bet and wager
Prediction markets	Sportsbook
Making predictions	Gambling

Understanding how prediction markets work compared to sportsbooks

Most people reading this will probably be familiar with using online sportsbooks. After all, you typically sign up, make a deposit and then use those funds as stakes for betting on the odds. However, prediction markets work in a very different way and here is an example of how you could make your first trades:

Signing up: First of all, you’d have to create an account at the prediction markets site which would typically ask for your name, date of birth, home address, email, mobile and so on. Remember that you’ll have to verify this information later on.
Depositing: Like at regular sportsbooks, you will be expected to make a real money deposit with something like a card, ewallet or bank transfer and then use those funds for your trades.
Browsing the markets: Now the fun begins where you can see all of the markets available for things like sports, politics, entertainment and so on. You’ll see each market represented as a percentage that is based on traders' views of that event happening. So for an NBA game between Phoenix and Portland, there would be a trade of a contract for 60% that Phoenix would win and 40% that Portland would win.
Purchasing your contracts: From here, you could opt to purchase the ‘Phoenix to win’ contract. This would cost $0.60 which would mirror the 60% chance of winning. Every contract won will pay back $1, so a riskier contract for Portland to win at 40% ($0.40) would yield potentially better returns. To purchase a contract, it’s just a matter of clicking on the relevant tab and then entering how many contracts you wish to buy.
Trading or keeping your contracts: Now you get the option to either hang onto your contracts until the event has concluded, or attempt to sell it (hopefully for a profit) to another customer before the event has settled. After all, you will be trading contracts with other customers, not the prediction markets site itself.

The legality of prediction trading vs sportsbooks

Since prediction markets don't feature any actual gambling, these sites don’t have to have the same kind of licensing and regulation as a regular online sportsbook. For example, our Kalshi review found that this prediction markets site is regulated by the Commodity Futures Trading Commission (CFTC) rather than a regular gambling authority.

This has the knock-on effect of meaning that prediction markets are legally available in different states to standard online sportsbooks.

It’s a situation that’s changing all of the time as the powers that be aim to regulate prediction markets. Not too long ago, you could use these sites in all 50 states. However, at the time of writing this guide, 11 states such as Arizona, Nevada, and New Jersey have issued bans against specific prediction markets sites.

4 Simple tips for getting used to event contracts vs sports betting

If you’re coming from the sports betting world, then all of this talk of event contracts is going to be fairly confusing. Well, fear not, as we’ve got the following tips to help you avoid making too many rookie errors:

First and foremost, you have to remember that trading prediction markets is opening yourself up to risk. As such, you should set a sensible budget for how much you can afford to lose and stick to it.

Following on from the above point, it’s best to play it safe in terms of the events that you are trading on. After all, it’s better to get a modest return compared to nothing at all.

Remember that the price of the contracts is set by the public, and this means you should avoid following the herd. This is definitely the case with those big sporting franchises that don’t always live up to the hype. Above all, you’ll be wanting to put in extra research to get the upper hand on everyone else trading on that particular market.

It’s worth noting that prediction markets sites don’t really tend to have the same amount of promo offers that you get at regular online sportsbooks. While that’s true, some prediction markets promos do exist and they can be well worth hunting down. Just make sure that you read through the small print first.

Pros and cons of prediction markets vs betting

By now you should hopefully have a pretty good idea of what prediction markets are and will understand whether this is right for you, or whether you ought to stick with sports betting. So here are the key pros and cons of giving prediction markets a try:

Pros and Cons

Pros

Legally available in more states
No betting margin to factor in
Way more events to make your predictions on
Innovative way to predict on future events

Cons

Can be confusing for newbies

Conclusion - All you need to know about prediction markets vs sportsbooks

By now you should have a pretty good understanding of the fact that prediction markets are something very different from regular online sportsbooks. After all, they don’t feature anything in the way of gambling, betting or odds, and you’ll instead be buying and selling contracts on a range of future events.

It’s an approach that has rightly taken the US by storm, particularly as prediction markets are still available in many more states compared to regular online betting. So be sure to click on any of the links for the recommended prediction markets sites in the banners of the page to sign up and if give it a try.