Prediction markets vs sportsbooks

The key difference: who you’re betting against

At a sportsbook, the book is your counterparty. It sets the odds, takes your bet, and pays you out of its own pocket if you win. Its profit comes from the margin — the vig — built into every line.

On a prediction market, you trade with other people. The exchange matches buyers and sellers on an order book and earns a fee on each trade; it doesn’t set the price or take a side. Polymarket US says the exchange “does not take the other side,” and Kalshi says you’re always trading against another member, often a professional market maker.

Everything else follows from that difference. If you’re choosing a platform, our ranking of the best prediction markets in the US compares the regulated options.

Side by side

Cost: fees vs vig

At -110 on both sides of a game, each side implies a 52.4% chance, so the sportsbook keeps about 4.5% of all the money wagered, whoever wins.

A prediction market shows its cost separately. On Kalshi, a taker buying a fair 50¢ contract pays a 1.75¢ fee — 51.75¢ for a $1 payout, the equivalent of about -107. Place a limit order that someone else fills and, on most Kalshi markets, you pay no fee at all.

Two caveats. First, the spread: in a thin market, the gap between the buy and sell price can cost more than the fee. Second, the CFTC warned platforms in August 2026 that dressing up contract prices as sportsbook odds is likely to mislead, so treat these conversions as a comparison tool. Our guides to prediction market fees and reading prices as odds go deeper, and you can check any conversion in our odds calculator.

Flexibility: selling before the game ends

A prediction market position has a live price until it settles. If your team takes an early lead and your contract jumps from 45¢ to 70¢, you can sell and lock in the gain — or cut your loss if things go the other way. At a sportsbook your only exit is the book’s cash-out offer, if it makes one, at a price it sets.

Limits on winning players

Because a sportsbook pays winners from its own money, it can limit the stakes of, or close accounts for, customers it considers too sharp. Prediction markets have no reason to: the winner’s profit comes from another trader. OG says accounts are never limited based on trading performance, and Polymarket US sets no trade-size limits, though exchanges do cap how many contracts one person can hold on a single event. (OG’s claim that sportsbooks routinely limit winners is a competitor’s claim; we found no independent data on how often it happens.)

The flip side: you’re up against other traders, some of them professional. Kiplinger has warned retail traders that they face “very sophisticated institutional organizations,” and research it cites found that most Polymarket accounts have lost money.

Legality and regulation

Sportsbooks are licensed and supervised by each state, and they can only take bets from people located in a state that has legalized sports betting. Prediction markets are regulated federally by the CFTC and are available in most states — but many states argue that sports event contracts are unlicensed sports betting.

As of September 30, 2026, the federal appeals courts are split on that question and the Supreme Court has been asked to decide. In practice, sports contracts are switched off on some platforms in Nevada, Michigan, Washington and Maryland. Our guide to whether prediction markets are legal has the details.

Taxes

Sports betting winnings are gambling income. For 2026, a sportsbook issues a Form W-2G only for a win of $2,000 or more at odds of 300-to-1 or longer, but all winnings are taxable, and from 2026 only 90% of gambling losses can be deducted (up to your winnings) if you itemize.

For prediction markets, the IRS hasn’t issued specific guidance. Robinhood issues no 1099 for event contracts, only an annual statement; Kalshi provides an annual profit-and-loss statement. See our guide to gambling and prediction market taxes and keep records of every trade.

Which should you use?

A prediction market may suit you if you want the best price on popular markets, like being able to sell before the final whistle, want to trade more than sports, or have been limited by sportsbooks.

A sportsbook may suit you if you want settled legal status in your state, the widest range of bet types and promotions, or live betting on everything.

Many bettors use both: our AI sports picks come with the odds range where each pick still has value, which you can compare against both sportsbook lines and prediction market prices. Wherever you play, do it legally and within a budget — see our responsible gambling guide.

The bottom line

Sportsbooks sell you a bet; prediction markets let you trade one. For even-money sports markets, prediction markets are often cheaper and more flexible, but their legal status for sports is still being fought over. To compare the regulated options, see the best prediction markets in the US.