A new analytical report from Citizens has revealed a surprising trend in the world of digital wagering: retail users on prediction market platforms are losing money at a higher rate than those using traditional, legal U.S. sportsbooks.
The study, authored by analyst Jordan Bender, draws on anonymized data from millions of transactions to compare the Return on Investment (ROI) across different wagering verticals.
The “Sharp” Squeeze on Retail Returns
According to the report, the median ROI for a prediction market user was -8% between July 2025 and early 2026. In contrast, the median ROI for legal sports bettors stood at -5%. Citizens argues that this discrepancy is driven by the unique competitive landscape of prediction markets.
Unlike sportsbooks, which often limit or ban highly successful “sharp” bettors, prediction markets are open exchanges where informed professionals can trade freely. This allows sharper players to capture more value, effectively “squeezing” the returns for the average retail user.
Professional bettors interviewed for the report noted that they view prediction markets as a superior opportunity specifically because of the presence of uninformed public traders. One pro bettor stated:
“We all want to be on the other side of the public; that’s the dream. Being a market maker is highly attractive. We all want to be DraftKings and FanDuel.”
The Demographic Shift: A Challenge to Sportsbook Acquisition
While prediction markets might currently be a small slice of the overall wagering volume, responsible for approximately 0% to 5% of sports betting displacement, they are significantly impacting new customer acquisition. Between late 2025 and early 2026, app downloads for FanDuel and DraftKings fell by 18% and 13% respectively, while Kalshi recorded over 6.3 million downloads.
The demographic data shows that prediction markets are capturing a much younger audience. Approximately 24% of Kalshi users are under 25, with a median age of 31. This is notably younger than the median age of 35 for the major sportsbooks. While Citizens remains skeptical of the long-term threat to the iGaming giants, the report warns that a massive marketing push surrounding the 2026 NFL season will be the ultimate test of which platforms can secure long-term player loyalty.
