
Most sports gamblers supposedly don’t care about pricing. After all, they would place moneyline and futures bets en masse via prediction markets such as Kalshi if they were price-sensitive.
As the conference finals for the National Hockey League and the finals for the National Basketball Association get underway, you may get better rates on these financial trading apps than on the main US sportsbooks in most areas.
So, how exactly are these prediction platforms challenging the realm of sports betting and what sets them apart?
Event Contracts: The lifeblood of Kalshi
Kalshi is a part of the derivatives market as it facilitates the trading of event contracts by investors.
Alright, let’s dissect that.
One type of derivative whose value is contingent on another good is an event contract. For Kalshi, the value of an event contract is based on the trust that its users have in the event’s actual occurrence. The price of an event contract on Kalshi’s platform is based on the amount that traders are willing to pay for a yes or no answer. While traders reach a consensus on a clear response, the price will vary. Like a betting exchange, Kalshi’s exchange will function in this manner.
Kalshi is unable to provide event contracts for specific events, though. Contracts based on geopolitical events, such as the outbreak of war in a certain country, are illegal under federal law. Political events such as elections, voting, or impeachments are also not covered by Kalshi’s event contracts.
One great similarity between prediction platforms and sportsbooks, however, is that top promotional and bonus sites, such as BonusFinder US, are in full support.
Kalshi Has the Better Price
Let’s use the recent NBA Eastern Conference finals to understand how prediction markets are outdoing sportsbooks on price.
On Kalshi, the chances of Indiana winning the series against New York were -150, or 60%. If you put $100 on the Pacers and they win, you’d get $67. The best odds on Indiana were -165 offered by DraftKings, as compared to FanDuel and BetMGM. That works out to an estimated chance of 62.3% and a win of $60 in the event that the Pacers seal the deal.
Kalshi offered better pricing in both situations.
Futures prices offered by Kalshi for all four NBA teams were lower than those offered by bookmakers in almost every instance.
Reasons why prediction markets have better pricing
Relatively little transaction costs are charged by prediction markets and exchanges, as opposed to the vig that sportsbooks attach to bets. The juice on lost bets is how sportsbooks earn money. The more consumers lose, the more money the bookies profit. Books, on the other hand, risk losing money on each wager. The house takes a loss if its clients come out ahead.
On the other hand, the Kalshis of this world are risk-averse and couldn’t care less if you come out on top or not. One can conduct transactions directly with another user or via a market maker.
When playing peer-to-peer, it’s quite similar to betting against a friend. You have the opposite view to theirs.
Kalshi receives liquidity from Susquehanna, a global trading company that is expected to generate $7.2 billion in sales in 2024. It generates revenue using a strategy known as “arbitrage,” in which it sells contracts for a slight premium over what it pays for them.
The theoretical hold, or the book’s edge, in a pick ’em game at a sportsbook is 4.76%, given that each team is priced at -110. On a betting market, you can see one side listed at -101 and the other at +100 for a single game. A theoretical hold of only 0.25 percent is that.
As more and more bettors discover that a smaller theoretical hold is beneficial for them, they will increasingly turn to prediction markets to take action.
Kalshi’s Market Position
Kalshi can provide a one-of-a-kind investment service. In the same vein as Robinhood, it will make investing accessible to individual investors, and due to the small price range of event contracts (ranging from zero to one dollar), investors are unlikely to become bankrupt. To place a monetary value on predictions about the future, Kalshi also develops a financial instrument. (While predictions about the future are the basis of every investment, Kalshi’s yes/no questions will give more weight to detailed views than broad optimism.)
However, Kalshi is neither a sportsbook nor a gambling app because:
- Portfolios can be constructed by traders with successful long-term returns in mind.
- Offers a single investing option across several domains.
- Rules set out by the federal government.
- Market access on a national scale, separate market access for each state.
- The purpose of money is to make a profit.
Final Thoughts
Sports bettors who are interested in trying Kalshi should feel welcome. However, gamblers should not view Kalshi as a gaming site. Event contract pricing in Kalshi does not function similarly to odds in a sportsbook. Betting sites establish odds. Kalshi’s users are establishing the prices of event contracts, whereas commodity prices are determined by community consensus — strategies that succeed while gambling against the “house” will not work.
Some may find the specifics of Kalshi and event contracts to be perplexing. Kalshi is not a gambling app, but rather a trade app. Those who equate gambling with investing clearly lack the expertise necessary to win big in either market. Never let yourself be swayed by a single profit or loss, as the most important thing is the long-term profit. At the end of the day, those are what will differentiate professional gamblers from professional investors.