Prediction Markets vs. Sportsbooks: How Each One Sets a Price
A prediction market and a sportsbook can both quote you a number on the same game or election, yet they are built on opposite business models. A sportsbook is a bookmaker that takes the other side of your wager and bakes a margin into the odds; a prediction market is a peer-to-peer exchange where traders buy and sell contracts from each other and the platform charges a fee. That difference shapes the price you see, who profits, and which regulator is in charge. This page explains both, with no betting advice.
Two different machines for the same question
A sportsbook works like a house. Oddsmakers and quantitative teams post an opening line based on data and models, then move it as money comes in, breaking news lands, and sharp bettors weigh in. The book's goal is to balance the action so it profits from the built-in margin regardless of who wins. You are betting against the operator.
A prediction market works like a stock exchange. It lists an event contract — typically a 'Yes' and a 'No' that together pay out $1 — and lets traders buy and sell with one another. The platform does not take a position; it matches orders and collects a fee. The price floats wherever supply and demand settle. You are trading against other people, not the house.
How each one makes money: the vig vs. the fee
A sportsbook earns its keep through the vig (short for vigorish), also called juice or the margin. It is not a charge at checkout; it is a haircut built into the odds themselves. Add up the implied probabilities of both sides of a typical line and they sum to more than 100% — often a few points above it on a standard two-way market. That overround is the book's edge, though it varies widely by sport, market type, and operator, and tends to run higher on props and parlays than on main lines.
A prediction market cannot hide a margin the same way, because 'Yes' and 'No' must add to $1. If 'Yes' trades at 56 cents, 'No' has to be 44 cents — arbitrage closes any gap almost instantly, so the two sides sum to roughly 100%. The exchange instead charges an explicit trading or settlement fee, structurally closer to a brokerage than a bookmaker.
Reading the price as a probability
On a prediction market the price is the probability. A contract trading at 62 cents implies the market thinks the event is about 62% likely, because the contract pays $1 if it happens and $0 if it does not. This is the cleanest way to read crowd sentiment as a number.
Sportsbook odds carry the same information but are dressed in different formats — American (-150, +220), decimal (1.67, 3.20), or fractional. To translate, convert the odds to their implied probability, then remember that the book's margin inflates the total. Because the vig pads both sides, raw sportsbook odds slightly overstate each outcome's chance, while exchange prices, summing to about 100%, give a tighter read on the underlying probability. Treat any single quote as an estimate, not a guarantee — markets are probabilities, not advice.
Who regulates what
In the United States the two live under different legal regimes. Sports betting is regulated state by state. After the Supreme Court struck down the federal PASPA ban in Murphy v. NCAA on May 14, 2018, each state set its own rules; sportsbooks operate under state gaming commissions and tribal compacts where they are licensed.
Prediction markets that list event contracts are overseen federally by the Commodity Futures Trading Commission (CFTC). Kalshi, founded in 2018, won CFTC approval as a designated contract market in November 2020 and launched to the public in 2021. Polymarket, founded in 2020, runs on blockchain infrastructure; it settled with the CFTC in January 2022 for offering unregistered binary options and later pursued a U.S.-regulated path. Through 2026 there has been active legal and political tension over whether CFTC-licensed sports event contracts can operate nationwide, bypassing the state system — a question still moving through rulemaking and the courts, with federal and state rulings pointing in different directions.
What each is actually built for
A sportsbook is built for betting on sports: deep menus of game lines, player props, parlays, live in-game wagering, and promotions, with prices tuned for entertainment volume.
A prediction market is built to price uncertainty across many domains — elections, economics, policy, weather, and sports among them. Its outputs double as data: a continuously updated probability that researchers, journalists, and the curious can read as a signal of what a crowd of traders collectively expects. That is why a news desk might watch the contract price even without any interest in placing a trade. Neither tool tells you what will happen; both give you a market's best current guess.
Frequently asked questions
What is the difference between a prediction market and a sportsbook?
A sportsbook is a bookmaker that takes the other side of your bet and profits from a margin baked into the odds. A prediction market is a peer-to-peer exchange where traders buy and sell event contracts from each other, and the platform charges a fee instead of setting the line. One is the house; the other is a marketplace.
What is the vig in sports betting?
The vig (vigorish, or juice) is the margin a sportsbook builds into its odds. It is not a separate charge but a haircut on the price, which is why the implied probabilities of both sides add up to more than 100%. That extra slice above 100%, called the overround, is the book's built-in edge. It varies by sport, market, and operator.
Why do prediction market prices add up to 100%?
On a prediction market, the 'Yes' and 'No' contracts together pay exactly $1, so their prices must sum to about $1, or 100%. If they drift apart, arbitrage traders quickly close the gap. The exchange makes money from an explicit trading or settlement fee rather than from a hidden margin in the price.
Are prediction markets legal in the US?
Prediction markets that list event contracts are regulated federally by the CFTC. Kalshi received CFTC approval as a designated contract market in 2020. Whether CFTC-licensed sports event contracts can operate nationwide, alongside state-regulated sportsbooks, remained an open and contested legal question as of 2026.
How do I convert prediction market prices to sportsbook odds?
A prediction market price in cents is already an implied probability — 62 cents means about 62% likely. To compare with a sportsbook, convert its American or decimal odds to implied probability. Remember the book's vig inflates both sides past 100%, so its raw odds slightly overstate each outcome's true chance versus the exchange.