Hedging, not betting, on sports via prediction markets
Sports betting has propelled the prediction markets to new heights. The latest proof: The contract on which team would win Super Bowl LX drew some $500 million worth of bets on Kalshi alone. (That led to big losers, too.)
But Kalshi is also seeking to show that its platform goes beyond betting on the outcome of sports games and other events. One of those uses is hedging business risks, as a new partnership is expected to underscore, Michael de la Merced is first to report.
Kalshi is now working with Game Point Capital, an insurance company that helps college athletics departments, sports teams and sponsors to manage the financial risks of performance incentives in athletes’ and coaches’ contracts.
Game Point Capital has historically worked with traditional insurers to hedge its contracts, first through Lloyd’s of London, the big insurance market, and then through American providers. But starting this past weekend, the firm began hedging through Kalshi as well. It expects to hedge about $30 million annually through the prediction market.
Kalshi estimates that the global sports insurance market at about $9 billion annually, a number it expects to grow — and hopes to capture a bigger piece of it.
“We want to offer the most efficient pricing for teams and other clients,” Will Hall, a co-founder and the C.E.O. of Game Point Capital, told DealBook.
He was introduced to Kalshi by a friend about a month ago, and was drawn to the prediction market’s claims that it could offer more transparent pricing than traditional sports books.
In some instances, Hall said, “it might make more sense to hedge through Kalshi than through traditional channels, which might come with additional costs and fees.”
How it works: Companies like Game Point Capital can use Kalshi’s “request for quotation,” a system for soliciting bids for particular contracts. Market makers on the platform can then find counterparties, helping build up volume.
Adequate liquidity is paramount for making hedging work, Hall said. (That said, Game Point Capital also expects to continue hedging through traditional insurers.)
Kalshi wants to expand this business. It has been building up a team to focus on sports hedging, and is expected to hire an executive to lead the unit, a spokeswoman told DealBook.