On Thursday, Kalshi’s event contracts on sports outcomes went live. Traders can bet on conference winners in the NFL and NBA. They can also trade on championship winners in the NFL, NBA, and NHL.
Since 2018, sports betting has been regulated at the state level. Because Kalshi is a federally regulated derivatives exchange, it’s available in all 50 states, regardless of whether those states have legalized sports betting.
The markets are proving popular, too. In the Super Bowl market’s first six hours, trade volume reached over $45,000. The Eagles had a 34% chance of winning the Super Bowl, and the Chiefs had a 31% chance.
Kalshi’s move into sports contracts comes about a week after another CFTC-regulated derivatives exchange, crypto.com, refused to suspend trading on its sports event contracts. Sporting events have economic consequences for cities, so event contracts can provide a legitimate hedging function for cities and business owners who miss out on an economic boom from an extended playoff run.
Sports event contracts also bring benefits to sports bettors frustrated with the limitations imposed by traditional sportsbooks.
Prediction markets offer flexibility and competitive pricing
Kalshi’s sports markets offer competitive pricing with substantially lower vig than sportsbooks. Because Kalshi’s prices are decided by traders alongside a small fee from the company, Kalshi’s price competitiveness is one of the greatest advantages it can have over traditional sportsbooks.
The team @Kalshi just dropped sports this morning. Now up on BeeBettor. https://t.co/yD5QdSV25Z pic.twitter.com/SNIhaP85C8
— BeeBettor (@BeeBettor) January 23, 2025
The advantages of trading on prediction markets instead of sportsbooks include:
- Trades with low vig
- Ability to cash out at any time before settlement
- Transparency about trade volume and other liquidity metrics
- No market lockouts for the house to update odds
- No bans or restrictions on winning traders
- Access in all 50 U.S. states
- Ability to follow other successful traders
- Hedging utility
The flexibility to sell a contract after its value increases is sometimes available at traditional sportsbooks, but is typically terribly mispriced and does not represent its true odds. Traditional sportsbooks can also ban or limit traders who beat the house while Kalshi’s business model accommodates winners.
Kalshi’s “Ideas” section also gives traders the chance to collaborate, share their insights, and follow other interesting people. Traders must have traded in the markets they post about to contribute to “Ideas,” giving traders a viable place to share advice.
Finally, Kalshi’s event contracts give businesses that may be impacted by the absence of a championship. Paying for “No” contracts on a city’s team could offset the loss of potential revenue from smaller gameday crowds. Traditional sportsbooks limit buyers, making hedging less feasible.
Hedging may be used by a stark minority of traders, but the masses who use these markets for entertainment contribute to price discovery that makes the strategic use of these markets possible.
Kalshi’s sports contracts may revive the debate over the appropriate balance between speculation and hedging, but these contracts will also offer compelling competition with traditional sportsbooks.
