Kalshi Beat Online Sportsbooks in March Madness Pricing, Says Citizens Capital Markets
Credit: winnifredxoxo/Flickr
According to a report from Citizens Capital Markets and Advisory, Kalshi offered better odds on March Madness games than its online sportsbook competitors.
The data, presented and written about by Jordan Bender, examined the odds for every game in the NCAA basketball tournament, which wrapped up with Michigan’s victory over Connecticut on Monday night. According to Citizens’ research, here’s how the average vigorish (“vig”), or theoretical hold, compared between popular sportsbooks and Kalshi. The numbers are averaged across all games in the tournament.
- Kalshi: 4.13%
- DraftKings: 4.35%
- FanDuel: 4.45%
- Fanatics: 4.48%
That means that, on average, Kalshi offered a price between two- and three-tenths of a percentage point better than the online sportsbooks. Although that amounts to a fraction of a penny per dollar wagered, in relative terms it means Kalshi’s take from any given volume of wagering would have been about 7% less than its competitors.
While that may seem trivial, such margins can mean the difference between winning and losing for a bettor in a thin-margin vertical like sports. Typical returns for a professional sports bettor range from 2% to 5%. So an extra 0.3% return on bets could equate to a boost of 10% or more on the bottom line.
Interestingly, Kalshi’s advantage over the sportsbooks in pricing wasn’t uniform. That is, it didn’t hold across all rounds of the tournament.
In fact, Kalshi actually had the worst odds in the First Four games, where its average vig was 4.9%. That’s higher than the sportsbook standard of 4.76%. Online sportsbooks varied between 4.6% and 4.7% for those games.
Then, Kalshi had by far the best pricing in the first round (3.8%) and the finals (4.1%).
More Kalshi Liquidity Means Better Prices, In Theory
These results aren’t surprising if one understands how betting patterns around the NCAA tournament typically work.
For the casual bettor, the First Four often barely registers on their radar. These games involve teams hoping to make it into the main bracket of 64, and they play out in the days before the first round starts on a Thursday. Most bettors are busy filling out brackets, setting up survivor entries, and drafting teams in local pools, such as Calcutta auctions. The First Four games don’t typically play any part in these gambling games, so many bettors will essentially ignore them.
By contrast, the first round generates tons of betting interest. Many college basketball fans (and non-fans) will attend parties, camp out all day in sportsbooks, travel to Las Vegas, and generally make a gambling event of it. They’ll bet on most, if not all of, these games while watching the non-stop action (games begin around noon eastern, and there’s no break for approximately 12 hours).
Likewise the finals, for obvious reasons.
Most likely, superior liquidity is driving the friendlier pricing for these sets of games. In theory, the more money that enters a market, the tighter the spreads, which translates into better prices on both sides.
A similar pattern played out during the NFL season, according to one of the charts included in the Citizens report. Kalshi’s Week 1 pricing was its worst of the season. As Kalshi gained market share throughout the year, its prices on “outcomes” (which team won or covered) improved. The three best average prices came during the final six weeks of the season.
Will Kalshi Compete With Sportsbooks on the Basis of Price?
Despite the tighter spreads at the end of the season, Kalshi still lagged behind the online sportsbooks. At the beginning of the season, Kalshi prices were around 15% worse than the sportsbooks. By the end of the season, the prediction platform had closed the gap to around 7% worse.
That means the March Madness pricing overtaking the sportsbooks represents a marked shift for Kalshi. It gives the prediction operator the chance to compete with sportsbooks based on price, at least in theory.
However, recreational bettors have not historically cared much about price. For evidence, one needs only to look at the margins on parlays and same-game parlays. These products are extremely operator-friendly, generating holds several times larger than single bets. Yet, they are consistently the most popular bets for retail punters who hope for an exciting win many times the size of their stake.
Marketing based on comparisons with online sportsbooks also holds some danger when considering ongoing litigation against Kalshi. In her recent dissenting opinion in a high-profile case that allowed Kalshi to keep operating in New Jersey, Judge Jane R. Roth specifically noted Kalshi’s marketing materials touting its legal sports betting in all 50 states. Such marketing material, she wrote, makes it difficult to accept that Kalshi isn’t a gambling operator but rather a federally regulated exchange offering “contract swaps.”
The more Kalshi markets itself as a sportsbook alternative, the more legal ammunition opponents and skeptical judges will accumulate.
Image credit: winnifredxoxo/Flickr (license)
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