Shares in big U.S. sportsbook operators have plunged over the past year as prediction markets—yes‑or‑no bets on sports and economic data—have surged in popularity. Fan Duel owner Flutter and rival DraftKings, both reporting slightly disappointing Q2 earnings, say they can win in the new arena too.

Prediction markets are federally regulated as financial contracts, giving them a national reach that state‑by‑state‑licensed sportsbooks lack. Because they host markets rather than bookie‑set odds, predictions remove a core bookmaker skill and dilute the traditional betting moat that fuels loyalty bonuses.

Both firms are doubling down by offering prediction contracts in states that ban sportsbooks, arguing that a prediction customer should have the same lifetime value as a sportsbook user. Flutter’s outgoing chief, Peter Jackson, frames predictions as incremental, not cannibalising demand.

The business model is more predictable: providers take a cut regardless of which side wins, and the sector now sees valuations of $22bn for Kalshi and $15bn for Polymarket, up from $2bn and $1bn a year ago. With competition from exchanges, brokerages and Robinhood, the betting duo may as well follow the money.