Kalshi Really Wants to be King of NFL Prediction Market Parlays
Credit: Mike Mozart/Flickr
Kalshi will reportedly not charge maker fees for NFL-only “combos,” prediction market parlance for parlays. The prediction operator is angling to remain at the top of the game for combos, given that they’re probably the most lucrative offering in the business.
Parlays on Kalshi have proven quite profitable on two fronts. Market makers — generally sophisticated institutional users — have raked in about $300 million from retail traders. And Kalshi itself has pocketed millions of dollars in fees.
However, until recently, those fees came from “takers,” usually the aforementioned retail users. Kalshi began charging maker fees as well recently. But a small note in the platforms rules carves out a specific exception for NFL-only parlays:
In other words, Kalshi is increasingly trying to monetize its parlays from both the maker and taker sides. But in order to encourage more NFL parlay action on its platform, it’s letting makers continue to book these parlays without fees.
NFL Parlays are Huge Money
Sportsbooks are generally happy to book a straight bet, but they are much, much happier to book a parlay. The reason is due to the compounding chance of loss.
Essentially, most sports bets have a negative expectation due to the vig, or house edge. When multiple bets with negative odds are combined, the chance of loss compounds.
One can see this in sports betting revenue data. While the house edge is usually around 4.5% for straight bets, sportsbooks routinely pocket 10% or more from their parlays. The introduction of same-game parlays, with their opaque proprietary pricing, only made things worse for the bettor. SGPs can hold upwards of 30% and have become the biggest moneymaker for sportsbooks in recent years.
The short of it is that most bettors enjoy punting a small stake for the possibility of a big payout. Even if they know the wager has a low expected value, they’re happy to gamble on a longshot in the same way they’re happy to buy lottery tickets.
Meanwhile, market makers are generally happy to offer these parlays to takers, understanding that they have a big long-term edge even while laying heavy proverbial juice. Sometimes, that bites these highly capitalized entities. But booking parlays is good business.
Since prediction markets don’t really have an SGP mechanic, they’re ceding that section of the market to traditional online sportsbooks. Prediction markets can still profit heavily from traditional parlays, though. Some industry estimates say parlays account for 80% of more of sportsbook revenue. And that’s revenue that Kalshi is looking to keep in its pocket, and away from competing prediction markets and sportsbooks.
Parlay Competition on Prediction Markets is Heating Up
If NFL parlay bets are so lucrative, why would Kalshi pull its maker fees off the table, which would allow it to profit even more from them?
Well, part of the reason may be due to increasing competition in the space. Polymarket US jumped into the parlay game this month, and it’s set to have its own parlay shop open for business just in time for NFL season.
Two sports-only prediction markets, Underdog and Novig, will also be joining the fray this season. Underdog has a built-in customer base from its days as a fantasy sports operator (it still has that functionality in its app). And Novig brings its own sports specialization as a designed exchange betting platform.
Because of the way Kalshi’s fees are structured, it makes more from longshot contracts than those priced closer to 50 cents, or +100 in sports betting odds. So it has an even greater vested interest in keeping that business than any other subset of contracts.
Considering all of those factors, it’s little surprise that Kalshi is offering fee-free business to market makers dealing NFL combos. It wants to ensure that market makers are putting their parlays on Kalshi, providing greater liquidity, which will, in turn, attract the retail traders that power most of Kalshi’s revenue.
Image credit: Mike Mozart/Flickr (license)
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