Retail traders using prediction market platforms are losing more money than traditional sports gamblers when placing increasingly popular multi-leg wagers, according to a new analysis that is intensifying scrutiny of the fast-growing prediction market industry.
Research released by financial services firm Citizens found that so-called “combo trades” offered by prediction market platforms such as Kalshi and Polymarket are producing significantly worse returns for ordinary users compared with sports betting parlays available on conventional gambling applications.
The report compared anonymized betting data aggregated by Juice Reel, a startup that allows users to track their wagering results across multiple platforms.
According to the analysis, the median return on prediction market combo wagers since October 2025 stood at negative 18 percent, compared with negative 12 percent for traditional sports betting parlays.
The findings suggest that retail users on prediction market exchanges may be facing steeper financial disadvantages than many participants realize as these platforms continue expanding rapidly across sports, politics, entertainment, and cultural events.
Citizens analysts Jordan Bender and Isabelle Slavin said the growing popularity of prediction market combo trades mirrors the increasing use of parlays in sports gambling.
Like parlays, combo trades allow users to link multiple outcomes together into a single wager with the possibility of very large payouts if every prediction proves correct.
However, the odds of success decline dramatically with every additional component added to the bet.
The Citizens report argues that the structure of prediction market combo products may actually create worse outcomes for ordinary users than those found in traditional sportsbooks.
The analysis has renewed debate over whether prediction market platforms truly offer a fairer alternative to sports gambling companies.
Both Kalshi and Polymarket have repeatedly argued that their exchange-based systems provide better pricing and more transparent markets because the platforms themselves do not directly take the opposite side of customer wagers.
Instead, they describe themselves as neutral marketplaces where participants trade contracts against one another.
Supporters of prediction markets often claim this structure reduces conflicts of interest compared with traditional sportsbooks such as DraftKings and FanDuel, which directly profit when customers lose bets.
But the new report suggests the reality for many retail users may be far more complicated.
Citizens said the prediction market ecosystem increasingly resembles a marketplace where ordinary traders compete against highly sophisticated institutional participants, including professional trading firms and algorithmic market makers.
Those institutional players are often capable of pricing odds more efficiently and responding to market changes much faster than retail users.
As a result, many smaller traders may consistently find themselves at a disadvantage.
Previous research already indicated that most retail customers on prediction market platforms ultimately lose money.
The latest report expands that analysis by focusing specifically on multi-leg wagers, which have become one of the fastest-growing categories within prediction markets.
According to Citizens, combo trades accounted for roughly 22 percent of Kalshi’s total trading volume in April, up sharply from around 13 percent in January.
That rapid growth reflects the broader expansion of sports-related betting activity on prediction market exchanges.
The report noted that prediction market platforms have increasingly adopted products that closely resemble gambling offerings popularized by sportsbooks.
Traditional sports betting operators have relied heavily on parlays because they generally generate higher profit margins due to the difficulty customers face in correctly predicting multiple linked outcomes simultaneously.
Prediction markets have now introduced similar structures under different branding.
Kalshi launched combo trades late last year, while Polymarket recently filed with the Commodity Futures Trading Commission to list what it calls “combinatorial outcome contracts” on its regulated US exchange.
Polymarket already offers similar products on its international platform.
Customers on prediction market exchanges can create highly customized wagers involving multiple conditions.
For example, a single combo trade may involve predicting the winner of a sports game, the total number of points scored, and the statistical performance of individual players.
The larger the number of linked outcomes, the higher the potential payout becomes.
At the same time, the probability of winning decreases exponentially.
One example highlighted in the report involved a Kalshi combo trade tied to an ongoing National Basketball Association playoff series between the San Antonio Spurs and the Oklahoma City Thunder.
The wager would reportedly pay out 455 times the original stake if 14 separate conditions all occurred.
Such enormous payout possibilities have become a major attraction for users seeking high-risk, high-reward opportunities.
However, analysts warn that the structure strongly favors market makers and sophisticated traders who possess advanced pricing models and high-speed trading systems.
Unlike sportsbooks that directly set betting odds internally, prediction market platforms rely on a “request for quote” system.
Under this structure, market makers and professional traders provide pricing quotes to users placing wagers.
Although technically any user can respond to quote requests on Kalshi, doing so effectively requires specialized software, automated trading systems, and the ability to generate accurate odds within seconds.
As a result, most ordinary users end up trading against highly sophisticated financial firms.
The report specifically mentioned major trading firms such as Susquehanna International Group as examples of institutional players participating within these markets.
Citizens analysts argued that these mechanics likely help explain why retail users are experiencing worse returns compared with traditional sports bettors.
“We believe there is a common misconception that prediction market companies, with lower fees or take rates compared to sportsbooks, must therefore be more customer-friendly or less predatory,” Bender and Slavin wrote in the report.
“Operator economics and customer economics are not the same, helping explain our analysis that suggests retail customers face worse ROI when using prediction market products.”
The analysis has drawn criticism from Kalshi, which strongly rejected the report’s conclusions.
Kalshi spokesperson Elisabeth Diana described the analysis as misleading and inaccurate.
She argued that the Citizens study relied on incomplete data that excluded many successful institutional traders and market makers active on the platform.
“It’s based on a flawed subset of data, and it ignores a large cohort of some of our most successful traders and market makers,” Diana said.
“Of course outcomes look worse if you don’t count winners.”
Citizens analysts defended their findings and said they remain confident in the methodology used.
Bender stated that the analysis accurately reflects the experience of retail users represented within the Juice Reel dataset.
The disagreement highlights broader tensions surrounding the rapid growth of prediction markets in the United States and internationally.
Prediction markets have evolved far beyond their original niche use in political forecasting and economic analysis.
Today, platforms allow users to wager on sports events, elections, entertainment awards, celebrity controversies, financial markets, and even weather-related outcomes.
Supporters argue prediction markets provide valuable information aggregation mechanisms and create more transparent forecasting systems.
Critics, however, increasingly question whether the platforms are simply evolving into lightly regulated gambling products targeting ordinary consumers.
The distinction between prediction markets and sports betting remains at the center of ongoing regulatory debates.
Traditional sportsbooks operate under state gambling regulations, while prediction market platforms often fall under federal commodities oversight.
That regulatory difference has allowed some prediction market operators to market themselves as financial exchanges rather than gambling businesses.
Yet as the products themselves increasingly resemble sports betting parlays, regulators and analysts are paying closer attention to consumer risks.
The Citizens report may further intensify calls for stricter oversight of prediction market platforms, especially regarding retail investor protections and transparency.
Analysts say many users may not fully understand the structural disadvantages involved when trading against institutional participants using advanced algorithms and pricing systems.
The growing use of high-risk combo products could also raise concerns about problem gambling behaviors among retail users.
For now, however, demand for prediction market products continues rising rapidly.
Investors and traders are increasingly drawn to platforms offering exposure to cultural, political, and sports-related outcomes through easy-to-use digital interfaces.
As competition intensifies between prediction market operators and traditional sportsbooks, the industry’s evolution may increasingly blur the line between financial trading and gambling.
Whether regulators eventually tighten oversight may depend partly on how rapidly retail losses continue growing and how aggressively platforms expand complex wagering products in the years ahead.
