Kalshi has increasingly become a platform where users trade on sports. An estimated 90% of all trades on the platform are now from its sports event contracts. Recent growth has been fueled by allowing users to combine sports wagers, and the popularity of the parlays could soon extend to esports markets.
April set a new record for trading volume at Kalshi, with users generating almost $15 billion in trades. That has been the trend this year, with volume increasing from $8.2 billion in January to $11.8 billion in February to $13.1 billion in March.
Trading volume is not to be confused with sports betting handle, and there have been accusations that Kalshi inflates its figures, particularly when it comes to esports markets.
However, there is a clear trend: each month sees more users trading on the platform, and the majority of the growth is coming from sports markets.
Parlays Growing At Kalshi
The record figures in April were predominantly from specific sports bets: parlays. Douglas Gouker highlighted in his prediction market-focused newsletter, Event Horizon, that about $1.2 billion of the $1.8 billion difference between March and April was due to parlays.
Kalshi first self-certified parlays back in August last year and launched same-game parlays in September.
The company fully launched the feature for all users under the name ‘Combos’ in December. Within the first week of the full rollout, the feature generated over $100 million in trading volume.
How Do Parlays Work On Prediction Markets?
There had been questions about whether a peer-to-peer exchange such as Kalshi could offer multiple-leg bets, which would require other users to take on high liability if a parlay hits. However, as market makers increasingly inject liquidity into the exchange, the feature has become increasingly popular.
Kalshi uses a Request for Quote (RFQ) system for these trades. When you select multiple “legs” (e.g., the Knicks to win and the total points to be Over 220), the platform sends a ping to liquidity providers.
Market makers such as Susquehanna and Jane Street respond with a single price for that contract, usually between $0.01 and $0.99. If the price is $0.25, you are paying 25 cents to potentially earn $1.00, effectively +300 odds.
At the moment, the feature is only available on select high-liquidity markets, such as the NFL, NBA, MLB, NHL, and NCAA. But with popularity growing, it is likely to be rolled out to esports in the near future.
Parlays Generate High Profits For Market Makers
Parlays offer gamblers the opportunity to land big wins from relatively low stakes. However, they rarely lead to those wins. As much of 70% of sportsbook revenue comes from bets involving multiple legs.
Typically, a sportsbook’s hold percentage is between 5 and 7% for single bets. For parlays, like the odds of one hitting, that rise rapidly, to as much as 30%.
While some outlandish bets will occasionally hit and lead to big payouts, the number of losing bets is enough to compensate for the outlier that wins.
On an exchange like Kalshi, individual users may be reluctant to take on the risk on the other side of a parlay, but major market makers will be more than happy to accept the bets. And as volume increases at Kalshi and parlays expand into other sports, such as esports, expect market makers to be the primary beneficiaries.
In the company’s earnings call this week, Flutter, the parent company of FanDuel, said it has already started trading on third-party prediction market platforms.
“When we think about the opportunities, it is principally around combos, and we are going to be market-making on as many platforms as we can,” said Flutter CEO Peter Jackson in the company’s earnings call. “I think it is a good opportunity for us to monetize our pricing expertise in doing so.”
Expect to see esports combos on offer at Kalshi in the near future, but remember that the odds of hitting are high for a reason.