I Would Love To See ‘Real’ Hedging On Sports Events

“Sports event contracts are valuable because small businesses can use them to hedge!”That’s been the refrain from Kalshi in recent months, as it tries to push the narrative that prediction markets are more than just venues for sports betting.We have seen a lot of examples of how this works — both in sports and outside of sports. But for sports events, the examples we have seen have been formulaic:A bar creates a promotion to attract customers, like free food or drinks if x team wins.The bar places a trade on x team winning If x team wins, the business can recoup some of the value of its promotion via Kalshi. If x team loses, it just got people to visit the bar. Win-win.We get a round of positive PRRinse and repeatAs long as prediction markets exist, honestly, I can’t hate it. If you want to run a promotion and hedge it, go for it.This whole concept was actually going on before prediction markets got big, with a furniture salesman in Houston who hedged promotions by placing bets at sportsbooks:I believe the first example of a small business hedge at a prediction market was a bar in New York City that hedged a promotion if the New York Knicks won a game. We’ve seen a variety of other examples since then.We also got a real silly example from the Kalshi for Small Business account, which tweeted and deleted a promotion hedge. (This is what I could salvage after it was deleted):I don’t know why the tweet was deleted, but this story was ridiculous on at least a couple of levels:The trade placed was for $150, and the person in question apparently owns multiple restaurants!I also later realized Illinois was something like a -220 to -250 favorite before this game, depending on when the trade took place, so this was a terribly silly exercise. She might have gotten back 60 or 70 bucks!Not only that, Illinois lost.I guess I understand now why they deleted it. Silliness excluded, I am a fan of finding use cases for actual hedging of business risk! But creating a promotion based on a sporting event and then betting on the other side of it is not hedging an underlying risk, it’s creating an artificial one that the business creates for itself andnot a great reason for prediction markets to exist in the macro.Here’s the part that’s funny/interesting… there are real ways for all sorts of small businesses to hedge risk on sports events. However, it involves betting against the local team.If you are a bar or a restaurant, you might get less foot traffic if the team is terrible. If you are a sponsor, your marketing efforts are less effective if fewer people are watching games because of poor performance. So how would you actually hedge risk? You would bet under on the local team’s win total, or on them to miss the playoffs, or other negative outcomes.Now that’s hedging. However, it would be terrible PR for everyone involved. So that’s probably why you haven’t seen anyone publicize it. Nonetheless, it’s a legitimate use case of sports event contracts. If someone wants to give it a try, I will be happy to publicize it in this newsletter.The Event Horizon briefingA quick look at what matters most in prediction markets.📍 The Big StoryNFL Week 1 downloadsPolymarket and Kalshi are outpacing the field in sports betting/sports event contracts download metrics:Longer list from Legal Sports Report here.Some thoughts on all this:Polymarket has a lot of catching up to do with Kalshi, but this is at least a start.DraftKings outpacing FanDuel here is perhaps not surprising, given how much it is leaning into prediction markets. But it will be interesting to see if DK can meaningfully cut into FanDuel’s sports betting lead this fall.Sleeper has a robust seasonlong fantasy business, so that has a bit of noise as a comp for all these other apps.It’s interesting to see the two big fantasy pick’em apps (which are also prediction markets) — PrizePicks and Underdog — not making the top end of this list.Novig’s splashy Sydney Sweeney ad has apparently not translated into a critical mass of new users. At least not yet.🔭 What To Watch ForWill Kalshi have to geofence tribal lands?If it feels like a while since Kalshi won in court, well, that’s because it has been a few months of decisions that have been decidedly bad for the prediction market.This time, it was a different case in the Ninth Circuit, and one where Kalshi had won in district court:Ninth Circuit Deals Another Blow To Kalshi, Sets Stage For Sports Ban On Tribal Lands (InGame): Two California tribes secured a major legal win against Kalshi and Robinhood Wednesday, as the U.S. Court of Appeals for the Ninth Circuit overturned a district court opinion that allowed prediction markets to offer sports event contracts on tribal lands. The decision does not immediately ban sports contracts on tribal lands, but sends the decision back to the district court, after determining that the Blue Lake Rancheria and Chicken Ranch Rancheria of Me-Wuk Indians are likely to win on the merits.We’ll be watching to see what the district court rules, which could set off a chain-reaction of more lawsuits from tribes.Side note: I never know how weird stuff I tweet goes sort of viral:🔥 Hot MarketFed raises interest rateKalshi traders had made the Federal Reserve raising interest rates by a quarter of a percentage point a favorite. And the Fed did that.What would happen this month was back-and-forth on odds until recently: 📝 New MarketsSelf-certifications listed with the Commodity Futures Trading Commission:DraftKings + NHL markets (there are more than this!)Soccer at Underdog💬 Quote Of The DayImagine a user standing on the floor of the Blue Lake Casino Hotel who downloads Kalshi and DraftKings, a classic online sports betting app. On Kalshi, she buys a $100 contract that pays if the San Francisco Giants win. On DraftKings, she wagers $100 on the same outcome. The bettor, the place, the stake, and the contingency remain the same. The only thing that changes is Kalshi’s vocabulary.—From the Ninth Circuit ruling against Kalshi, see above📊 Volume Tracking For Tuesday, Sept. 15Kalshi volume: $1.88 billionSports: 21.7% of volumeParlays: 57.1% of volumeCrypto markets: 17.5% of volumeTrend line:Volume on other exchanges:Rothera: $40.8 millionNovig: $34.9 millionCrypto.com/NADEX: $34.4 millionDraftKings’ DKeX: $26.8 millionUnderdog’s exchange: $22.5 millionProphetX: $5.4 millionUnderdog has launched a data site that includes both its own exchange and volume that flows through it via other exchanges. You can see it here.Notes: It appears Polymarket US has been reporting data incorrectly on its exchange site in some recent days; data will return when that is sorted out. Crypto.com data coming soon.Data is provided by Ticker TrackerAnd the latest from me at The Closing Line:The Closing LineThe Parlay Paradox For Prediction MarketsI always struggle with how much to write about prediction markets at The Closing Line. After all, you signed up for a gambling newsletter — not one about prediction markets…Read more20 hours ago · 10 likes · 2 comments · Dustin GoukerYou can’t pause current events when your payments can’t keep up. With every failed deposit or lengthy withdrawal process, customers lose trust in your brand. And when money doesn’t move fast enough, your liquidity suffers. PayNearMe’s PayXMTM platform is purpose-built for Payment Experience Management, giving you the fast, familiar payment options your customers want while streamlining back-end operations for your team. Get real-time payments for real-time events—from one simple integration.News roundupEverything else important that happened in or was written about prediction markets:🚨 Important stuffLeBron James Polymarket Deal Worth $15 Million a Year (Front Office Sports): “LeBron James will make more money from his Polymarket partnership than from playing for the 76ers, Front Office Sports has learned. The prediction-market platform is paying James $15 million a year under the recently announced partnership, sources tell FOS. James is not an investor in Polymarket, just an endorser, one source says. The length of his agreement with Polymarket was not clear, although one source says it’s an ‘ongoing engagement’ with multiple ‘deliverables,’ such as social media posts and other content. Under the deal, James will focus on promoting football, not basketball.”Polymarket’s Next Bet? It Can Also Be a Media Company (Wired): “There are obvious advantages to these companies going all-in on media strategy. For starters, it turbocharges brand awareness, doubling as marketing. For companies that like to talk about how they might be used to protect investments, creating a potential revenue generator separate from trading fees is itself a way to diversify risk. It also helps the markets shape their own narratives.”⚖️ Legal and regulatory newsIs The CFTC Stepping Up Its Regulation Of Prediction Markets, Or Its Defense Of Them? (InGame): “Are the moves a serious sign that the CFTC actually cares about order in its markets and will genuinely take steps to regulate them? Or are they a ploy to win courtroom battles? The answer probably depends at least a little on your preexisting views about whether the CFTC has any right to be a nationwide sports betting regulator.”More from the Texas legislative hearings on prediction markets:📣 Industry newsPolymarket Launches 2026 Midterms Hub (press release): Polymarket today announced the launch of its 2026 Midterms Hub, a dedicated destination for following the U.S. midterm elections across the platform’s live markets, with new tools to track individual races, market movement, con