What Is the Difference Between a Prediction Market and a Sportsbook?

A sportsbook is a bookmaker. It sets the odds, takes the other side of your bet, and operates under a license from the state you are standing in. A prediction market like Kalshi is an exchange. It lists yes-or-no contracts, matches you with another trader who takes the opposite view, charges a fee on the trade, and operates under federal commodities law, supervised by the Commodity Futures Trading Commission rather than a state gaming board.

On a game, both let you back one team. The differences are in who sets the price, how the house gets paid, and — the part being litigated right now — whether your state gets any say. As of September 27, 2026, three federal appeals courts have ruled on that last question, and they don't agree.

General information, not legal advice. Everything below is dated because it is moving.

What is an event contract?

The CFTC describes an event contract as a derivative whose value comes from the outcome of an event. The usual form is a yes/no contract with a fixed payout, typically $1, and an expiry. The agency's own example is rain: if "yes" trades at 70 cents and "no" at 30 cents, the market is saying roughly 70% for rain.

A sports contract works the same way. "Will the Chiefs win?" pays $1 per contract if they do and nothing if they don't. If YES costs 60 cents, the market's price implies about a 60% chance. You can sell before the game ends at whatever the market pays at that moment, which a sportsbook ticket doesn't always allow.

Kalshi operates a designated contract market, a CFTC-registered exchange, and began listing sports-event contracts in early 2025, according to the Sixth Circuit's September opinion. CFTC Regulation 40.11 has long barred exchanges from listing contracts that involve "terrorism, assassination, war, gaming, or an activity that is unlawful under any State or Federal law," and lets the Commission open a 90-day review of any contract that might break that rule. Whether a contract on a football game is "gaming" in that sense sits at the center of the whole dispute. On June 10, 2026 the CFTC proposed amending 40.11 and adding an Appendix F setting out how it would evaluate such contracts: a 90-day review process and a set of public-interest factors applied contract by contract. It is a proposal, not a final rule.

Who regulates each one?

	Sportsbook	Prediction market (CFTC-registered)
License	Separate license in each state	One federal registration as an exchange
Regulator	State gaming commission (or tribal regulator)	CFTC
Who takes your bet	The book itself	Another trader, matched by the exchange
Where you complain	State regulator	The exchange, then the CFTC

Our guide to how sports betting is regulated covers the state side in detail.

How do pricing and fees differ?

A sportsbook doesn't send you a fee invoice. Its cost is baked into the odds.

Take a standard point spread at -110 on both sides. Each side's implied probability is 110 ÷ (110 + 100) = 52.38%. Add the two: 104.76%. The 4.76 points above 100% is the book's margin. In dollars: if one bettor puts $110 on each side, the book collects $220 and pays the winner $210 ($110 stake + $100 profit). It keeps $10, or 4.55% of the money wagered, whoever wins.

An exchange shows you a price set by other traders and then charges a separate fee. Kalshi's fee schedule (the version effective July 7, 2026, the latest we found) gives the general taker fee — the fee for an order that fills immediately against a resting one — as:

fee = round up(0.07 × contracts × price × (1 − price))

Buy 100 YES contracts at 60 cents:

• Cost of contracts: 100 × $0.60 = $60.00
• Fee: 0.07 × 100 × 0.60 × 0.40 = $1.68
• All-in cost: $61.68. Payout if YES: $100. Profit: $38.32.
• Break-even probability: 61.68 ÷ 100 = 61.68%
• In American odds: −(61.68 ÷ 38.32) × 100 = −161

Now the coin-flip case, where a book would deal -110. 100 contracts at 50 cents: fee = 0.07 × 100 × 0.50 × 0.50 = $1.75. All-in cost $51.75, profit $48.25, which works out to about −107. On that single trade the exchange is cheaper than -110. The formula peaks at 50 cents and shrinks toward the extremes: at 90 cents the fee is 0.07 × 100 × 0.90 × 0.10 = $0.63.

The fee isn't the whole cost, though. You also pay the gap between the best bid and best ask, which can be wide on thin markets, and not every market uses the general rate. Kalshi's help center says some big events carry different fees. Orders that rest on the book pay no fee by default. In the series where Kalshi does charge makers (its schedule lists the NFL, college football and MLB game markets among them), the rate is 0.0175 in the same formula, charged only when the order fills. The Academy's Kalshi fees guide walks through more cases. If implied probability is new to you, start with implied probability.

What is the legal fight, in one page?

Kalshi's position is that the Commodity Exchange Act gives the CFTC exclusive jurisdiction over contracts traded on a federally registered exchange, so state gambling laws can't be applied to them. States answer that a bet on a game is a bet on a game, and that federal law never took gambling regulation away from them. The AGA counts state and tribal governments in 16 states that took action against sports prediction markets during 2025, including cease-and-desist orders and lawsuits. Arizona, for example, sent cease-and-desist orders to three platforms in May 2025.

The appellate record, as of September 27, 2026:

• Third Circuit (New Jersey), April 6, 2026 — for Kalshi. In KalshiEX v. Flaherty, 172 F.4th 220, the court affirmed a preliminary injunction blocking New Jersey from enforcing its gambling law against Kalshi, over a dissent by Judge Roth.
• Ninth Circuit (Nevada), August 28, 2026 — for the state. In KalshiEX v. Assad, the court affirmed a district judge's order dissolving Kalshi's injunction.
• Sixth Circuit (Ohio and Tennessee), September 25, 2026 — for the states. The panel held that Kalshi hadn't shown its sports contracts are "swaps" within the CFTC's exclusive jurisdiction. It also held, in the alternative, that even if they were, federal law "neither expressly nor impliedly preempts" the states' gambling laws. It affirmed Ohio's win and vacated the injunction Kalshi had won in Tennessee.
• Fourth Circuit (Maryland) — pending. A district court denied Kalshi an injunction on August 1, 2025. The appeal is still open.
• Supreme Court — petition pending. New Jersey asked the Court to review the Third Circuit's ruling in No. 26-299, Flaherty v. KalshiEX, filed September 2 and docketed September 8, 2026. Kalshi's response is due November 9, 2026. The Court has not decided whether to hear it.

All of these are preliminary-injunction rulings, which means they are about who is likely to win, not final judgments. A circuit split like this one is the classic reason the Supreme Court takes a case, but nothing obliges it to.

What does it mean for bettors?

Access can change with a court order. Whether a prediction market can serve you depends on where you are and which injunctions are standing that week. The Sixth Circuit vacated Kalshi's Tennessee injunction on September 25, for example.

Your complaint path is different. A state gaming regulator has no complaint process for an exchange it doesn't license. Disputes go to the exchange first, then to the CFTC, which takes reports through its Complaint Form and whistleblower Form TCR. It also runs a Reparations Program for customer complaints against futures industry professionals.

Sportsbooks in some states are under pressure to keep their distance. The Sixth Circuit's opinion records the Ohio Casino Control Commission warning its licensed sportsbooks that it would "take administrative action" against any licensee that associated with a company it considered to be operating illegally in Ohio.

The price can be better or worse; do the arithmetic every time. A 50-cent contract carrying a $1.75 taker fee per 100 contracts works out to about -107, better than -110. A thin market with a four-cent spread may not. The Academy's lesson on prediction markets and sports betting compares the two in more depth.

What would settle it: a Supreme Court merits ruling, a final CFTC rule that a court treats as changing the analysis, or Congress. As of September 27, 2026, none has happened.

Editor's note: TrueEdge builds odds and pricing tools that display both sportsbook and prediction-market prices, and earns affiliate commissions from licensed sportsbooks. We have a commercial interest in how this fight resolves; this guide describes it rather than arguing a side. Checked September 27, 2026.