Kalshi Users Lose $294M on Combo Bets as Sophisticated Traders Profit

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On-chain data shows Kalshi users lost $294 million on parlay bets in recent months, with savvy traders on the other side booking gains. Bloomberg notes retail traders are struggling, with the Roosevelt Institute reporting $583.5 million in losses since 2018. Sports betting dominates prediction market volume at 80%, even as legal challenges continue in several U.S. states over platforms like Kalshi and Polymarket. On-chain analysis reveals most activity remains concentrated in sports and political markets.

Key Insights

  • Parlay wagers or combo bets are big money losers for retail users on Kalshi, according to a new Bloomberg post.
  • Sports betting remains the biggest market for prediction platforms despite legal battles over whether they can offer sports betting contracts.
  • Prediction markets remain one of the fastest-growing areas of the crypto market.

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The rally showed how much sentiment had shifted after a weak start to the year. PayPal had struggled with slow branded-checkout growth, tighter margins, and pressure from larger payment rivals. The latest report gave bulls a firmer case, but it did not remove execution risk.

Sports Betting Dominates Prediction Market Volume As Criticisms Increase

The Bloomberg report comes a few weeks after the Roosevelt Institute, a US think tank, published a study on regular users’ performance on Kalshi. The study claims that retail users have lost $583.5 million on the platform since its 2018 launch.

However, Kalshi criticized the study, noting that there is no “house” as the report title suggested. The prediction market platform also stated that it operates like an exchange, matching buyers and sellers.

Interestingly, the Bloomberg report noted that sophisticated traders taking the other sides of the long-shot trades are the ones making the profits. This aligns with the Roosevelt Institute’s claim that there is a skills gap among platform users, a claim Kalshi had countered.

This is not the first time prediction markets, particularly Kalshi and Polymarket, have been mired in controversy over user losses. Sportico reported in May that retail users lost over $100 million on parlay in the first four months of the year based on Dune Analytics data.

Source: Dune Analytics
Source: Dune Analytics

It was later reported that Dune Analytics, Kalshi’s partner, has removed data on user losses from its free plan. Instead, the data is now accessible only to those who subscribe to the Dune Enterprise plan, which costs around $40,000 annually.

The massive losses from parlay highlight the impact of sports betting on prediction markets. Sports now account for around 80% of all prediction markets volume, with World Cup contracts on Kalshi pulling in around $27 billion in volume. Open interest on Kalshi and Polymarket has fallen after the World Cup.

Legal Battle Over Sports Betting for Prediction Markets Intensifies

Meanwhile, the fate of sports betting for prediction markets remains hanging. Kalshi and Polymarket are currently embroiled in multiple lawsuits in the US, with state regulators seeking to ban these platforms from offering sports betting.

More than a dozen states have banned prediction platforms from offering sports betting, including New York, Nevada, Illinois, Connecticut, Wisconsin, and Arizona. The Commodity Futures Trading Commission (CFTC) and the prediction platforms have also filed multiple lawsuits to lift the ban.

So far, the results have been mixed. Prediction markets recently received a reprieve after a federal judge blocked Minnesota from enforcing a state law that would have criminalized them.

US District Judge Katherine Menendez granted Kalshi’s request for a preliminary injunction that prevents any enforcement action against exchanges registered with CFTC as designated contract markets until the case is decided on its merits.

However, a court in Washington also granted the state’s request to temporarily block Kalshi from offering sports contracts. A similar request was granted in Michigan last month, and Kalshi’s efforts to block New York from applying its gambling laws were denied.

With varying decisions all over the US on whether prediction platforms can offer sports contracts as swaps, experts believe the Supreme Court will make the final decision.

The post Kalshi Users Lose $294 Million on Combo Bets as Sophisticated Traders Profit appeared first on The Market Periodical.

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