Prediction markets vs sportsbooks: key differences
A sportsbook is the house: it sets the odds and takes the other side of your bet. A prediction market such as Kalshi or Polymarket US is an exchange: you trade contracts with other users, and the platform earns a fee on each trade instead of profiting when you lose.
On a typical 50/50 line, that makes the exchange slightly cheaper: a Kalshi taker buying at 50¢ breaks even at 51.75%, against 52.38% at a −110 sportsbook price. The spread can erase that edge, and the two products also differ on limits, regulation and tax paperwork.
Side-by-side comparison
| Sportsbook | Prediction market (Kalshi, Polymarket US) | |
|---|---|---|
| Business model | House takes the other side of your bet | Exchange matches buyers and sellers |
| Who sets the price | The book's traders | Bids and asks from users |
| How it charges | Margin built into the odds (the vig) | Per-trade fee, plus the bid-ask spread |
| Typical cost on a 50/50 bet | 52.38% break-even at −110 | 51.75% break-even at 50¢ on Kalshi as a taker |
| Winning bettors | Can be limited by the book | Capped in practice by order book depth |
| Regulator | State gaming regulators | CFTC (federal), with states contesting sports contracts |
| Minimum age | Set by each state | 18+ on Kalshi; some states restrict certain contracts |
| Tax forms | W-2G above IRS thresholds | Kalshi's help center lists no form for event-contract gains |
Exchange vs house
Economist Steven Levitt studied NFL betting and found that bookmakers "do not play the traditional role of market makers matching buyers and sellers but, rather, take large positions with respect to the outcome of game" (Levitt, *Economic Journal*, 2004). In almost half the games in his data, at least two-thirds of the bets fell on one side.
Kalshi describes the opposite arrangement. Its help center says "Kalshi facilitates trading by matching buyers and sellers with opposing views," and the two sides' money together totals $1 per contract. When you buy Yes at 45¢, someone else has committed 55¢ to No.
On an exchange, then, the person on the other side of your trade is another trader, often a professional market maker. Your win is their loss, not the venue's.
Who sets the price
At a sportsbook, the book posts a line and adjusts it. Levitt found that adjustments "are typically small and relatively infrequent": the point spread posted on Tuesday was within one point of the kickoff spread in 90% of games. He also found books shade lines toward favorites and home teams, which attract more bets, to raise their margin.
On a prediction market, the price is wherever the highest bid and lowest ask meet, and it can move with every order. Our guide to reading prices as probabilities explains bids, asks and midpoints.
Vig vs fees: a worked comparison
The standard sportsbook price on a point spread is −110. Levitt describes it as paying "110 units if a bet loses" but receiving "only 100 units if the bet wins."
Sportsbook, −110 on both sides
- Implied probability per side: 110 ÷ 210 = 52.38%
- Both sides together: 104.76%, so the book's built-in margin is 4.76 points
- You need to win 52.38% of these bets to break even
Kalshi, 100 contracts at 50¢, taker order
- Cost: $50.00
- Fee: 0.07 × 100 × 0.50 × 0.50 = $1.75 (Kalshi fee schedule, effective July 7, 2026)
- Break-even: 51.75 ÷ 100 = 51.75%
Kalshi, same market but the ask is 51¢
- Fee: 0.07 × 100 × 0.51 × 0.49 = $1.7493
- Break-even: 52.75%, slightly worse than −110
Polymarket US, 100 contracts at 50¢
- Fee: 0.0695 × 100 × 0.25 = $1.7375, using the coefficient in QCX LLC's CFTC filing effective September 17, 2026
- Break-even: 51.74%
The fee alone is usually cheaper than a −110 vig, but the spread decides whether that holds. In a liquid market with a 1¢ spread, the exchange tends to come out ahead. In a thin market with a wide spread, it may not.
You can also post a limit order and wait to be filled as a maker, which Kalshi's schedule prices at a 0.0175 rate instead of 0.07, with a maker multiplier that defaults to 0 unless a series says otherwise. Compare live costs on our price comparison page, try other prices in the fee calculator, and see Kalshi fees and Polymarket fees for the full formulas.
Limits on winning bettors
Sportsbooks can cap how much a customer may bet. In data reviewed by the Massachusetts Gaming Commission on September 30, 2025, an average of 0.64% of bettors across the state's seven online sportsbooks were limited, according to CasinoBeats. The commission moved to require books to notify customers when their betting is limited.
Levitt's paper explains the incentive: a house that takes positions has to protect itself from bettors who know more than it does.
An exchange earns its fee on every trade, win or lose, so a profitable trader does not cost it money directly. The constraint you hit instead is liquidity. If only 300 contracts sit at the best ask, buying 1,000 pushes you into worse prices.
Regulation
Prediction markets in the US operate as designated contract markets (DCMs) overseen by the Commodity Futures Trading Commission. The CFTC designated KalshiEX LLC as a DCM on November 4, 2020. Polymarket's US exchange, QCX LLC d/b/a Polymarket US, operates under a CFTC designation order amended in November 2025 and files its rule changes with the agency.
A DCM can list a new contract without prior approval by filing a self-certification under CFTC Regulation 40.2 by the close of the business day before trading. Regulation 40.11 bars event contracts involving "terrorism, assassination, war, gaming, or an activity that is unlawful under any State or Federal law," and lets the CFTC open a 90-day review.
Sportsbooks are licensed state by state. After the Supreme Court's May 14, 2018 decision in *Murphy v. NCAA*, the Congressional Research Service wrote that "states are now generally free to adopt sports gambling regulatory schemes."
The two systems collide over sports. Many states argue that sports event contracts are wagers that need a state gaming license, and federal courts have split. Our Is Kalshi legal? guide tracks the cases. This is general information, not legal advice.
Taxes and reporting
The difference here is mostly about paperwork. For 2026, IRS instructions require a sportsbook to issue Form W-2G when sports-wagering winnings reach $2,000 and are at least 300 times the wager. Regular 24% withholding applies when winnings minus the wager exceed $5,000 and meet the same 300-times test.
Kalshi's help center lists Forms 1099-INT (interest), 1099-MISC (credits and rewards), 1099-B (crypto transfers) and 1099-DA for digital asset transactions. It does not list a form for event-contract gains. Robinhood's help center says it "doesn't provide a 1099 for event contract trades" and that the IRS has not issued specific guidance on event contracts. Talk to a tax professional about your situation; this is not tax advice.
Availability
Sportsbooks are available only in states that have legalized them, under each state's rules. Kalshi requires users to be 18 or older with a legal US residential address, but several states contest or restrict its sports contracts. Check availability by state before opening an account on either platform.
Both products carry real risk of loss. A contract or bet can go to zero, so stake only money you can afford to lose.
FAQ
Is Kalshi a sportsbook?
No. Kalshi is a CFTC-designated contract market where users trade contracts with each other, while a sportsbook is a state-licensed house that sets odds and takes the other side of bets. Several states nonetheless argue that Kalshi's sports contracts are wagers.
Are prediction markets cheaper than sportsbooks?
Often, but it depends on the spread. A Kalshi taker buying at 50¢ breaks even at 51.75% versus 52.38% at a −110 sportsbook line, but a 1¢ wider ask pushes Kalshi's break-even to 52.75%.
Do prediction markets limit winning traders?
An exchange earns fees from both sides and is not your counterparty, so winners do not cost it money directly. In practice, the size you can trade is limited by how many contracts sit on the order book.
Do I get a W-2G from Kalshi?
Kalshi's help center lists Forms 1099-INT, 1099-MISC, 1099-B and 1099-DA, not a W-2G. Sportsbooks issue W-2Gs when 2026 winnings reach $2,000 and at least 300 times the wager; ask a tax professional how to report either.