DraftKings vs. Kalshi vs. Polymarket: Understanding the New Betting and Prediction Markets

The Landscape: Three Models for Betting on Outcomes

The way people wager on real-world outcomes is being reshaped by three very different platforms, each operating under a different regulatory framework and business model:

• DraftKings — a licensed U.S. sportsbook focused on sports betting and daily fantasy
• Kalshi — a CFTC-regulated exchange for trading event contracts on real-world outcomes
• Polymarket — a crypto-native prediction market operating outside U.S. jurisdiction

All three let users put money behind their beliefs about what will happen in the world. But how they work, what they offer, who regulates them, and how they make money are fundamentally different.

DraftKings: The Sportsbook

What It Is

DraftKings is a licensed online sportsbook and daily fantasy sports platform. Founded in 2012 as a daily fantasy company, it pivoted to sports betting after the U.S. Supreme Court struck down the federal sports betting ban (PASPA) in May 2018, opening the door for states to legalize.

DraftKings is publicly traded on the NASDAQ under the ticker DKNG.

How It Works

Users deposit money, browse available sporting events, and place bets at odds set by DraftKings. The platform acts as the bookmaker — it sets the lines (odds), manages risk, and profits from the built-in margin (called the "vig" or "juice") between what bettors on each side are paying.

Example: If you bet on the Chiefs to beat the Eagles, DraftKings sets the odds (e.g., -110, meaning you bet $110 to win $100). The slight edge built into both sides of every bet is how the sportsbook makes money regardless of who wins.

What You Can Bet On

• Major professional sports (NFL, NBA, MLB, NHL, soccer, tennis, golf, MMA)
• College sports (where legal)
• Daily fantasy sports contests
• iGaming (online casino games, in select states)
• Increasingly: props, live in-game betting, parlays, and micro-bets

Business Model

DraftKings operates as a bookmaker/house. Its revenue comes from:

1. Hold percentage — the margin between what's paid out to winners and what's collected from losers (typically 7–10% for sports betting)
2. iGaming — online casino games where the house edge is mathematically built into every game
3. Daily fantasy — entry fees for contests, with DraftKings taking a cut of each prize pool

The company's economics depend heavily on customer acquisition cost (bonuses, promotions, advertising) versus lifetime value of each bettor. This is why sportsbooks spend aggressively on marketing — the industry is in a land-grab phase as states continue legalizing.

Regulation

DraftKings is licensed on a state-by-state basis under gambling regulations. Each state has its own gaming commission that sets rules for:

• Who can operate
• What bets are allowed
• Tax rates on revenue
• Consumer protection requirements

As of early 2026, sports betting is legal in 38+ U.S. states plus Washington D.C. DraftKings operates in most of them but must obtain a license in each jurisdiction.

Kalshi: The Regulated Event Exchange

What It Is

Kalshi is a designated contract market (DCM) regulated by the Commodity Futures Trading Commission (CFTC). Founded in 2018 and launched to the public in 2021, Kalshi allows users to trade binary event contracts on real-world outcomes beyond sports.

Unlike DraftKings, Kalshi operates as an exchange, not a bookmaker. It matches buyers and sellers rather than taking the other side of bets.

How It Works

Kalshi offers event contracts that pay out $1.00 if an event happens and $0.00 if it doesn't. The market price of a contract at any given time reflects the crowd's implied probability of that outcome.

Example: A contract "Will the Fed cut rates at the March meeting?" trading at $0.72 implies the market believes there's a 72% chance of a rate cut. If you buy at $0.72 and the Fed cuts, you receive $1.00 (profit of $0.28). If they don't cut, you lose your $0.72.

Users can buy or sell contracts at any time before the event resolves, allowing them to trade in and out of positions as probabilities shift — much like trading stocks.

What You Can Trade

Kalshi's contract categories include:

Kalshi has fought significant regulatory battles to expand its offerings, notably winning a court case in 2024 to list political event contracts (election markets), which the CFTC had initially opposed.

Business Model

Kalshi makes money through exchange fees — a small transaction fee on each contract traded. It does not take a position against users or act as the house. Revenue scales with trading volume and the number of active contracts.

This is fundamentally different from DraftKings' model: Kalshi profits when people trade more, regardless of who wins. DraftKings profits from the spread between winning and losing bets.

Regulation

Kalshi is regulated by the CFTC as a derivatives exchange, the same regulatory framework that governs futures markets like the CME. This means:

• Contracts must be approved by the CFTC before listing
• Customer funds are held in segregated accounts
• The exchange follows strict reporting and compliance requirements
• Available to U.S. residents (must verify identity)

Polymarket: The Crypto Prediction Market

What It Is

Polymarket is a decentralized prediction market built on the Polygon blockchain. Founded in 2020, it gained mainstream attention during the 2024 U.S. presidential election when its election markets attracted hundreds of millions of dollars in trading volume and were widely cited by media outlets as a real-time gauge of election probabilities.

How It Works

Polymarket uses a similar binary contract structure to Kalshi — contracts resolve to $1 or $0 based on outcomes. However, the infrastructure is fundamentally different:

• Contracts are settled in USDC (a cryptocurrency stablecoin pegged to the U.S. dollar)
• Users connect a crypto wallet to trade (no traditional bank account required)
• The order book and settlement happen on-chain or through a hybrid system using the Polygon blockchain
• Deposits and withdrawals are in crypto, though Polymarket has simplified the onboarding with credit card deposits

Example: During the 2024 election, Polymarket's "Will Donald Trump win the 2024 presidential election?" contract became one of the most-watched prediction markets in history, with cumulative trading volume exceeding $3 billion on election-related markets.

What You Can Trade

Polymarket offers contracts across many of the same categories as Kalshi:

• U.S. and international politics
• Crypto prices and events
• Sports outcomes
• Pop culture and entertainment
• Economics and business
• Science and technology

Polymarket tends to move faster than Kalshi in listing new markets, partly because it doesn't need CFTC approval for each contract. This gives it more flexibility but less regulatory protection for users.

Business Model

Polymarket generates revenue primarily through trading fees. Because it operates on crypto infrastructure, it also benefits from the broader crypto ecosystem's liquidity and 24/7 trading availability.

The platform has raised significant venture capital funding and appears to be in a growth/market-share phase rather than focused on near-term profitability.

Regulation

This is Polymarket's most significant distinction — and risk:

• Not available to U.S. residents. Polymarket geo-blocks U.S. users following a 2022 CFTC enforcement action and $1.4 million settlement for operating an unregistered trading facility
• Operates under a less defined regulatory framework than Kalshi or DraftKings
• Funds are held in crypto, not in FDIC-insured or SIPC-protected accounts
• Smart contract risk: bugs or exploits in the underlying code could theoretically affect funds
• Resolution disputes are handled by a decentralized oracle system (UMA protocol), not a traditional regulator

Despite these risks, Polymarket has attracted significant volume due to its ease of use, global accessibility (outside the U.S.), deep liquidity on popular markets, and the attention it received during the 2024 election cycle.

Side-by-Side Comparison

The Broader Market: How Big Is This?

Sports Betting

The U.S. sports betting market has exploded since the Supreme Court's PASPA ruling in 2018. What was previously limited to Nevada is now legal in 38+ states. The American Gaming Association has reported annual operator revenue exceeding $10 billion, with total handle (amount wagered) far higher since sportsbooks only keep a fraction of each bet.

The competitive landscape is dominated by a few major players:

• FanDuel (owned by Flutter Entertainment) — the largest U.S. sportsbook by market share
• DraftKings — the second-largest, and the only pure-play publicly traded U.S. sportsbook
• BetMGM (joint venture between MGM Resorts and Entain)
• Caesars Sportsbook, ESPN BET (Penn Entertainment), and others

Prediction Markets

Prediction markets are much smaller than sports betting but growing rapidly. They serve a different purpose — rather than entertainment, many users treat them as information markets that aggregate crowd wisdom about the probability of real-world events.

The 2024 election cycle was a turning point for prediction market visibility. Polymarket's election markets were cited by major news outlets, hedge funds, and political analysts as a complement (or alternative) to traditional polling.

Kalshi's successful legal fight to offer political contracts in the U.S. further legitimized the category. The question is whether prediction markets can sustain high engagement outside of major election cycles by expanding into economics, company earnings, sports, and other categories.

Global Online Gambling

The global online gambling market — encompassing sports betting, online casino, poker, and lottery — is estimated at over $90 billion in annual revenue and continues to grow as more jurisdictions legalize and mobile penetration increases.

Key Differences That Matter for Users

Price Discovery

DraftKings sets its own odds through a combination of algorithms and human traders. The odds reflect DraftKings' view of probabilities, adjusted to ensure a profit margin.

Kalshi and Polymarket use market-based price discovery — the price is determined by buyers and sellers trading against each other. This means the crowd sets the probability, not the house. Academic research has generally found that prediction market prices are well-calibrated probability estimates, often outperforming expert forecasts and polls.

Risk Profile

• DraftKings: Your counterparty is DraftKings itself (a publicly traded, state-regulated company). Funds are regulated by state gaming commissions
• Kalshi: Your counterparty is another trader on the exchange. Funds are held in segregated accounts under CFTC oversight
• Polymarket: Your counterparty is another trader. Funds are held in a crypto wallet with no regulatory backstop. Smart contract risk exists

Use Cases

What This Means for Investors

The convergence of sports betting, prediction markets, and crypto-based platforms creates several investment angles:

DraftKings (DKNG) is the most direct public market play. Its stock reflects the growth trajectory of U.S. online sports betting, the path to sustained profitability, and competition with FanDuel and others. Key metrics to watch: revenue growth, customer acquisition cost trends, state-by-state legalization progress, and the shift toward profitability.

Kalshi is private but represents a new category — regulated event trading. If prediction markets gain mainstream adoption for economics, politics, and corporate events, Kalshi is positioned as the U.S. regulated venue. Watch for a potential IPO.

Polymarket is also private and operates in crypto. It represents the thesis that prediction markets work best as global, permissionless, 24/7 platforms — but it carries regulatory and platform risk.

Flutter Entertainment (NYSE: FLUT), the parent company of FanDuel, is the other major publicly traded sports betting company for investors who want exposure to the market leader.

For broader exposure, the growth of all three platforms is positive for payment processors, data providers, and cloud infrastructure companies that power the underlying platforms.

Conclusion

DraftKings, Kalshi, and Polymarket represent three distinct visions for how people engage with real-world outcomes:

1. DraftKings is the established sportsbook — regulated, mainstream, focused on sports entertainment with a proven business model built on the bookmaker's edge
2. Kalshi is the regulated exchange — bringing prediction market concepts to U.S. users under CFTC oversight, with ambitions to become the go-to platform for trading on any measurable event
3. Polymarket is the crypto-native disruptor — globally accessible, fast to list new markets, and proven by the 2024 election cycle, but operating outside traditional regulatory frameworks

The betting and prediction market industry is still in its early innings. Sports betting is expanding state by state, prediction markets are fighting for regulatory acceptance and mainstream adoption, and the line between "betting" and "trading" continues to blur.

For users, the right platform depends on what you want to bet on, where you live, and how much regulatory protection you value. For investors, these platforms represent different bets on how humans will wager on the future.

This article is for educational purposes only and does not constitute financial advice or an endorsement of gambling. Always understand the risks before placing any wager or trade.