Prediction markets have taken the world by storm, enabling consumers to predict the outcomes of sports contests, entertainment events, political events, cryptocurrency prices, and more. Ineed, they share some similarities with traditional online sportsbooks. Yet, there are three key differences, according to Coinbase Global (NASDAQ:COIN) Head of Prediction Markets Toni Gemayel.
Sportsbooks Vs. Prediction Markets Differences
Coinbase recently rolled out its prediction markets powered by Kalshi. It offers markets on sports, cryptocurrency prices and a wide range of outcomes.
Gemayel told Benzinga that while sports often grab headlines as prediction markets compete with online sportsbooks, "sports are the least interesting part of prediction markets" to him.
"There's just so many other interesting aspects to them," Gemayel said.
Though sports markets may draw the most attention, Gemayel outlined three key differences between online sportsbooks and prediction markets that help explain the sector's growth.
Pricing
"The first is that the pricing is significantly better," Germayel told Benzinga.
Germayel said that compared to sportsbooks like Flutter (NYSE:FLUT) owned FanDuel and DraftKings (NASDAQ:DKNG), Coinbase is often 10% cheaper or more on the pricing for consumers.
This means that users can lock in bigger profits betting on teams to win or against the spread compared to the normal take they get after sportsbooks take their cut.
Live Trading
"The second thing is the ability to trade in and out of a market at any time," Germayel told Benzinga.
Trades that are made on traditional online sportsbooks may be locked and not able to be sold unless the sportsbook allows the ability to cash out at various times, the head of prediction markets at Coinbase said.
"They'll only do if it's negative EV. And the reason is it's player verse the house. The house being the sportsbook."
Germayel said Coinbase is an exchange that doesn't care who wins or who loses on each outcome. It is a "peer-to-peer model,” he adds. "We're just facilitating trades, so our interests are aligned with our customers, as opposed to a sportsbook in which their interests are not aligned."
Different Products
Coinbase also offers a "set of products" that sportsbooks can't, Germayel says.
"I think that you'll see Coinbase really innovate in the next year on sports derivatives markets that are different than what exist today," Germayel said.
Germayel highlighted markets like climate risk, Fed interest rates and CPI markets as items that aren't traditionally offered on sportsbooks.
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