Prediction markets are intrinsically related to sports betting, despite their claims to the contrary, as a significant portion of their volumes come from contracts for sporting events. This emphasizes the necessity of finding alternative avenues for progress.

According to Eilers & Krejcik Gaming's (EKG) analysis, "U.S. Prediction Markets: How Big, How Fast, What's Next?" sports event contracts will eventually account for 44% of turnover on major US prediction markets.

"That represents a significant drop-off from the 75-80% of trading volume that sports represents today, reflecting growth in categories like finance/crypto, politics, news, and culture/entertainment,” according to the research firm.

Prediction markets like Kalshi frequently provide sports event contracts, especially those relating to well-known sports like basketball and football. These platforms are growing rather than shrinking their sports-related menus.

Growth Outside of Sports Is Crucial for Prediction Markets

Platforms like Kalshi and Polymarket became well-known in the run-up to the 2024 presidential election, but it was their ventures into sports event contracts that spurred expansion, legal disputes, and regulatory scrutiny.

Although EKG believes that sports contracts presently account for 75% to 80% of the volume of the prediction market, that ratio may be higher in any particular week. For instance, sports derivatives accounted for 17 of the 20 most traded contracts on Kalshi during the week of November 23–29. In just NFL and college football games, around $604 million was exchanged.

Kalshi’s most popular contracts for the week of Nov. 23-29.

This suggests that if sports' volume contributions to yes/no exchanges decrease over time in percentage terms, it will probably be due to increase in other categories rather than a decrease in sports turnover. Since state authorities focus on sports contracts when contesting prediction markets in court, Kalshi and rivals would do well to engineer that expansion.

According to EKG, sports will continue to be the biggest area for prediction markets at the previously reported 44% clip, followed by news at 16% and cryptocurrency price derivatives at 31%. In order to support the 11-figure values that investors are giving the closely held companies, the research firm adds that non-sports growth is essential for prediction markets, including Kalshi and Polymarket.

How Non-Sports Growth Can Be Produced by Prediction Markets

Prediction markets in non-sports categories can flourish in the finance sector, whether it is through cryptocurrency or other marketplaces. Given that Polymarket and Kalshi just signed agreements with Google Finance, operators seem to know as much. While the latter has a deal with Yahoo Finance, the former is also collaborating with CNBC.

Furthermore, event contract vendors can and do collaborate with brokerage firms to obtain direct access to cryptocurrency-enthusiastic clientele, many of whom are already sports bettors. Improved cultural lexicon penetration, which Kalshi's collaboration with CNN may achieve, would also spur growth outside of sports.

“Greater cultural visibility over time as specific markets surface more frequently in news cycles (e.g., politics on the CNN ticker) or album sales totals/discussions on social media,” concludes EKG.