Prediction Market Dominoes

It was announced this week that federally regulated prediction market Kalshi has entered the sports betting market. 

For those who are not as familiar with these mediums, they generally mirror what one can bet on a sports betting website, but you receive lower vig, and are able to cash in and out of a bet pretty seamlessly; should liquidity be available, of course, because you need someone to take the other side of your bet. 

Anyone who has played a betting exchange, or similar markets (that are currently available) will find them old news. 

I was involved with a peer to peer loans exchange start-up years ago that ran into a regulatory morass. Other exchange or market medium changes, like California racing given the go-ahead to legally offer horses in this way back in 2012, got stuck in a bog of craziness. 

• "The company’s regulator, the U.S. Commodity Futures Trading Commission, has a new acting chairman, Republican Commissioner Caroline Pham, who announced additional leadership changes on Wednesday. Those departures include that of the CFTC’s general counsel, Rob Schwartz, who recently argued against Kalshi’s election contracts before a panel of federal appeals judges. The leadership changes and the more approving view of Trumpworld toward prediction markets suggest companies like Kalshi could be free to launch even more event contracts like the sports-related ones."

This definitely looks to be shaped much better for success. 

There's still political risk - so many states get paid so much money for sports betting deals with the Fanduels or DKs of the world and they take that revenue stream seriously. But for bettors who are serious of getting great prices and not having to pay ridiculous cash out fees, it's certainly welcome. 

I guess another item is the bettor him or herself. 

In Canada, for example, the previous government deregulated the phone, internet and banking space, providing competition to the monster companies that held sway over consumers. This opened up cheap deals and better banking outlets, but consumers were married to the old way, and were infiltrated with "bundles" and special deals where they didn't move on from the old guard in any big numbers. 

Despite better prices, better cashouts and a great interface, I suspect similar occurs in this space, should these markets proliferate. DK and Fanduel (plus their branding) and SGPs, special offers and all the rest will probably do just fine. 

This always brings me back to what folks who read the blog have heard before, and you may be tired of hearing it. But Kalshi is new. From being new they have entered a betting space with new technology. They've got regulation on their side. They have an in. There's a non-zero chance they could be huge. 

Horse racing had this "in" more than 14 years ago. They had the ear of pols. They already worked with regulators. Exchanges were approved. 

People shouldn't be diving in to bet Kansas City Chiefs Super Bowl futures, or Kentucky Derby futures or whatever other futures that are or will be offered in the Kalshi market. They should be betting already into an horse racing industry owned or led market. It was given first-mover on this over a decade ago. 

Have a nice weekend everyone.