Sports-Betting Stocks Face Growing Threat From Prediction Rivals

Stock traders are making a clear prediction about prediction markets: They’re fast becoming the next big thing for online gambling.

That speculation raced across Wall Street this week after Robinhood Markets Inc. — which played a pivotal role in unleashing the pandemic’s day-trading frenzy — and the exchange Kalshi reported that prediction markets wagers are surging at a rapid pace. Robinhood, which has a partnership with Kalshi to offer wagers on everything from football games to political races and other everyday events, saw more than 2 billion prediction contracts trade in the third quarter alone.

Traders rushed to dump shares ...