Prediction Markets vs Sportsbooks: What’s the Difference?

In the US, the real money sports betting landscape is different for every state, and for some states, such as Pennsylvania and Michigan, you can place real money wagers at online sportsbooks. However, for other states, such as Texas and California, real money online sportsbooks are banned. The primary reason for banning online sportsbooks in certain states is due to fixed odds betting laws. Some states prohibit any forms of fixed odds betting within the state.

Unlike real money sportsbooks, there are no fixed odds in betting at prediction markets. Since there are no fixed odds betting, traders can instead buy and sell contracts on future events. Therefore, prediction markets are legal in the US and available in all 50 US states. However, it is important that you only use regulated exchanges, and legal prediction sites must be regulated by the Commodity Futures Trading Commission (CFTC).

Sportsbooks use a house vs player model, whereas with prediction markets, it is a peer-to-peer exchange. Online sportsbooks are known as the house, and each sportsbook sets the markets and fixed odds. By setting its own markets and odds, the sportsbook takes a ‘vig’ from all bets placed.

Prediction markets do not set any future event contracts. Prediction sites provide a platform for traders to buy and sell contracts on future events. All trades are in binary outcomes (yes or no), and contracts usually range from $0.01 to $0.99. Winning contracts are settled at $1, while losing contracts are settled at $0. The value of each contract is based on the trades by other traders on the likelihood of an event occurring. As long as there are two sides to every contract and sufficient market volume, you can buy and sell contracts.

Sportsbooks allow you to bet on most sports, including major leagues and on athlete performances. Some real money sportsbooks also have unique betting markets, such as election bets and movie award winners.

As covered in our Kalshi vs Robinhood guide, there are diverse future event contracts at prediction sites. You can buy and sell contracts on most real-world events, including sports predictions, election results, culture and entertainment outcomes and economic forecasts.

You cannot close your bets early at sportsbooks unless the betting site has a cash out feature. However, even when using the cash out feature, you must factor in the sportsbook margin for any betting markets.

When trading at prediction sites, you are allowed to close your positions early before the real-world event concludes. When we compiled our Kalshi vs Polymarket guide, we mentioned that as long as another trader is willing to buy your contract and that there is sufficient market volume, you can sell your contracts to take out profits or mitigate your losses.