Market prediction platform Kalshi launched a customizable same-game parlay betting feature called Parlay on September 29. Despite generating less than $2,000 in revenue on its first day, it caused the market value of US sports betting giants DraftKings and Flutter Entertainment, the parent company of FanDuel, to evaporate nearly $7 billion in a single day. This feature allows users to customize multiple event combination bets, marking Kalshi's official entry into the multi-event sports betting arena, but analysts believe its current threat to traditional sports betting companies is limited.
Product Launch and Feature Highlights
Kalshi launched a customizable same-game parlay betting feature called Parlay on September 29, allowing users to choose from multiple betting options such as match outcomes, total scores, or whether players score touchdowns to create custom parlay bets. The feature officially went live a few hours before the Monday night football game.
This marks Kalshi's first foray into multi-event sports betting four weeks after receiving self-certification approval. Bets are submitted in the form of quote requests, with institutional market makers pricing the opposite bets, and the platform provides transaction matching services.
First Day Trading Data and Market Performance
On its launch day, the Parlay feature had a total trading volume of $255,757, with 1,229 transactions covering 175 parlay combinations. The median probability hovered around 16%, equivalent to odds of +525.
Despite a certain volume of transactions, the platform's revenue was minimal, only collecting $1,762.01 in fees. Multi-leg trades accounted for only 0.2% of the total trading volume and 0.15% of fee revenue, a small scale compared to traditional sports betting companies' parlay revenue.
Market Reaction and Stock Price Impact
Although Kalshi's revenue scale was small, the launch of the new feature triggered a significant drop in sports betting stocks. DraftKings' stock price fell by 12.1% in early trading on Tuesday, closing down 11.6% at $37.40, with a single-day market value evaporation of $2.5 billion.
Flutter Entertainment's stock price plummeted by 10.3% to $254.00, with a single-day market value evaporation of $5.5 billion. Since the end of August, the two companies have seen a cumulative market value evaporation of over $15 billion, reflecting market concerns about competitive pressures in the prediction market.
Industry Impact and Competitive Analysis
Other gambling-related stocks also fell, but the declines were relatively smaller. Caesars Entertainment fell by 3.03%, MGM Resorts by 5.12%, and Penn National Gaming by 2.28%. Data providers Genius Sports and Sportradar fell by 7.86% and 5.81%, respectively.
Analysts point out that parlay betting traditionally accounts for more than half of sports betting revenue, about a quarter of the transaction volume, and is key to maintaining profit margins above 10%. If Kalshi can offer similar products with higher odds, it may force traditional sports betting companies to adjust their pricing models.
Product Promotion and User Acceptance
The promotion of the Parlay feature was limited, which may be one reason for its low user acceptance. The feature was not advertised before its launch and disappeared from the platform immediately after the football game started, and it was not available through Robinhood, which is the platform for more than half of Kalshi's activities.
Benchmark analyst Mike Hickey stated, "Unless it can scale up or become more robust, it seems to lack competitiveness." Oppenheimer's Jed Kelly also noted that compared to traditional sports betting companies, Kalshi's parlay betting product is still in its early stages.
Regulatory Environment and Legal Challenges
Kalshi operates under the regulation of the Commodity Futures Trading Commission (CFTC), insisting it is a financial exchange rather than a sports betting company. However, state attorneys general, tribal groups, and regulatory agencies question this claim, considering its sports products akin to illegal gambling.
Hickey stated, "Kalshi's style, speech, and even smell resemble a sports betting company. The strategy of making itself look like a sports betting company carries certain risks." Regulatory uncertainty is one of the main challenges the company faces.
Market Positioning and Future Outlook
The prediction market allows Kalshi to enter jurisdictions not yet touched by traditional sports betting, such as California and Texas. This market access intensifies the concerns of operators who fear that if these states legalize sports betting, Kalshi might take the lead.
FanDuel has established a prediction market partnership with the Chicago Mercantile Exchange Group in response, although its product has not yet launched and initially does not include sports betting. Analysts believe that despite causing investor concerns, Kalshi's actual business impact remains limited.
