Users of prediction market platforms may be more confident in their mathematical abilities than their performance supports, according to research commissioned by the American Gaming Association (AGA).
The study found that prediction market users expressed confidence levels close to those of sports bettors. However, when tested objectively, they performed much closer to non-gamblers than to sports bettors.
The findings arrive as Kalshi, Polymarket and other platforms expand sports event contracts in the United States.
Study Compares Financial Literacy Across Gambling Groups
The research surveyed 3,149 US adults, including sports bettors, casino players, iGaming users, prediction market participants and non-gamblers.
Gamblers achieved an average financial literacy score of 3.93 out of five, compared with 3.72 among non-gamblers. Some 41% of gamblers were classified as highly financially literate, compared with 27% of non-gamblers.
Sports bettors recorded the strongest combination of mathematical confidence and objective performance. Prediction market users showed similar confidence but did not match those test results.
David Forman, AGA vice-president of research, said: “Prediction market users tend to overestimate their mathematical skillset, often thinking they are better at mathematical reasoning than they actually are, unlike traditional sports bettors who have a more accurate self-assessment.”
AGA Repeats Concerns Over Investment Positioning
The AGA said the results support concerns that consumers may view prediction markets as investment products rather than gambling activities.
“The research highlights the risks of prediction markets marketing sports betting as investing against peers and the dangers of misleading consumers into thinking they just have to be smart to win,” Forman said.
The association has criticised event contracts offered by prediction market operators, arguing that they resemble sports betting while avoiding state gambling rules and taxes. Operators maintain that their products fall under federal Commodity Futures Trading Commission oversight.
Study Reveals Financial Literacy May Support Safer Gambling
The study also identified a relationship between financial literacy and responsible gambling. Participants with moderate or high financial literacy achieved stronger Positive Play scores than those with lower levels.
The findings suggest that education around risk, probability and bankroll management could support responsible gambling programmes.
The study adds evidence to the debate over how prediction markets should be presented to consumers. Analytical confidence does not translate into profitable decisions, particularly when users misunderstand probability or risk. So, regulators should focus on marketing claims, product disclosures and positioning event contracts as investment opportunities.
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