Before the 2022 FIFA World Cup, only three players had ever scored ten goals in a single tournament, an achievement that hadn’t occurred since 1970. French forward Kylian Mbappé made history as the fourth player to reach this milestone, finishing the tournament on ten goals, which also earned him his second Golden Boot. Argentine superstar Lionel Messi scored eight goals, while Spain took home the championship trophy. Despite the tournament's expansion, star names continued to dominate the scoring charts.
In the betting landscape, casual bettors often focus their wagers on well-known players and favorable outcomes. When these bets converge, the resulting financial exposure can be significant. A string of favorable results for favorites in late 2024 reportedly led to a $438 million loss in gross gaming revenue for Flutter, the parent company of FanDuel.
Parlays accentuate this tendency towards concentrated betting. These multi-leg wagers allow bettors to turn a small investment into a substantial payout, while bookmakers find value in bundling bets into a single price, which masks profit margins.
The introduction of parlays has proven to be a lucrative strategy for sportsbooks, aligning recreational demand with strong financial incentives. In states like Illinois, New Jersey, and Colorado, parlays accounted for about 27% of bets placed but generated a stunning 56% of sportsbook revenue, according to data from The Wall Street Journal.
Sportsbook operators have to manage licenses, taxes, compliance, promotions, market access fees, and revenue sharing with suppliers, all of which skew the business model toward high-margin, price-insensitive wagers. This makes parlays an ideal betting option for many.
For years, parlays seemed untouchable. However, on September 29, 2025, Kalshi introduced a new product called Combos, which triggered a drop in stock prices for DraftKings and Flutter of 12% and 10% respectively, even though the product had just launched. This offering allows independent market makers to compete for each order and assume the opposite side of customer bets in a highly competitive environment.
Prediction markets have also expanded their reach into states like California and Texas, where online sports betting remains banned. The sustainability of this access amid state-level challenges remains uncertain, but the demand for these markets is undeniable.
Kalshi reportedly processed around $125 million in wagers for each match during the World Cup. Interestingly, even on a recent Sunday without major games, Kalshi maintained a transaction volume of approximately $945 million, although these figures are not directly comparable to sportsbook handle or revenue since they reflect notional contract values.
During the World Cup, the daily number of combo creators on Kalshi saw a remarkable increase, rising from about 100,000 at the tournament's start to nearly 400,000 by July 6, according to a seven-day moving average from White Swan Predicts.
The NFL has been essential in driving significant volume in prediction markets, particularly last season. For the opening week of the 2026 season, White Swan estimates that Kalshi will hold around $8 billion in market maker risk—an impressive leap forward in product availability and market depth.
In a sportsbook, the operator sets the price and manages risk, deciding whether to accept a bet. In contrast, exchanges require customers to build their own combos and submit a "request for quote." Competing market makers then respond with prices, with the best quote winning the order and assuming the associated risks until settlement.
For example, a bettor might request a combo featuring England to win, Harry Kane to score, and over 2.5 goals. While it appears to the user as an accumulator bet, it functions as an auction for risk behind the scenes.
These prediction contracts are becoming integrated into fintech, cryptocurrency, and fantasy sports applications, presenting expansive retail availability. However, every combo will still require detailed pricing.
Capital availability limits how much risk a market maker can take on. For instance, if a parlay is priced at 17/1, a $1 stake necessitates $17 in collateral until settling. While some bets may tie up a maker's capital for weeks, a same-day combo bet can clear this capital much quicker, influencing profitability based on capital efficiency.
Competition plays a crucial role; pricing too low can lead to lost orders while pricing too high can attract sharp money betting against it. Unlike sportsbooks that can set parlay margins, market makers must earn a profit based on competitive pricing.
The interrelatedness of outcomes in a match complicates pricing models. A comfortable win for France, for example, increases the chances that Mbappé scored and that over 2.5 goals were scored overall. Market makers are challenged to evaluate how the probability of one outcome influences others across thousands of potential combinations in real time. This is a complex endeavor that requires more than just mirroring sportsbook prices, which typically account for bookmaker margins and business strategies.
Market makers often short the same public favorites, leading to mass settlements on multiple combinations from a single event. The key task is to price the entire probability distribution, not just individual outcomes.
Financial market makers bring essential capital and execution infrastructure, but they frequently lack the sports-specific analysis required. In contrast, professional betting syndicates have developed sophistication in sports pricing and risk management over decades. With sufficient capital, these syndicates are well-equipped to maximize value in prediction market combinations.
Waterhouse VC is collaborating with one of the leading professional betting syndicates to seize on these opportunities. By marrying extensive experience in pricing complex betting risks with proprietary models and trading infrastructures built for exchanges, they aim to create a competitive edge in the evolving landscape of sports wagering. With all quotes needing full collateralization, increased capital allows for a larger capacity to offer quotes, which is vital for developing that pricing advantage across a wider range of markets.
