Before the start of this year's FIFA World Cup, only three players had ever scored ten goals in a single tournament, a feat that hadn't been accomplished since 1970. French forward Kylian Mbappé made history by becoming the fourth player to achieve this milestone, finishing with ten goals and earning his second Golden Boot. Meanwhile, Argentine superstar Lionel Messi netted eight goals, while Spain secured the championship trophy.
In the betting world, casual wagers often congregate around popular names and favored results. When these bets align, the financial burden on bookmakers intensifies significantly. For example, a series of outcomes favoring the favorites in the NFL late in 2024 resulted in an estimated loss of $438 million in gross gaming revenue for Flutter, the parent company of FanDuel.
Parlays, which combine multiple bets into a single wager, exacerbate this issue. As previously reported, bettors favor these combinations because they can transform a small stake into a sizeable return. Bookmakers prefer them due to the challenging nature of observing margins when multiple bets are bundled together.
In recent years, parlays have emerged as the most lucrative product for sportsbooks, effectively marrying consumer demand with favorable economics. According to The Wall Street Journal, in states like Illinois, New Jersey, and Colorado, parlays represented approximately 27% of total wagers but accounted for a staggering 56% of sportsbook revenue.
Operators must manage various costs, including licenses, taxes, compliance, and market-access payments. This complex cost structure incentivizes high-margin, price-insensitive bets, making parlays a perfect fit.
For a considerable time, parlays appeared immune to competition. However, on September 29, 2025, Kalshi launched its product, Combos. The following day, shares in DraftKings dropped by 12%, while Flutter's shares fell by 10%, despite the new product barely being active. This marked the introduction of competitive market makers for every order, fundamentally altering the landscape for these high-margin wagers.
Prediction markets have begun reaching consumers in states like California and Texas, which are among the largest markets where online sports betting is still prohibited. The future of this access and the survival of sports-related prediction markets remains uncertain, despite evident demand.
Bank of America estimates that Kalshi processed about $125 million per World Cup match. On a recent Sunday without major games, the exchange still managed a turnover of approximately $945 million, showcasing its substantial volume, although these figures are not directly comparable to sportsbook handles or revenues.
During the World Cup, the risk associated with same-game parlays on Kalshi climbed dramatically. The number of daily combo creators surged from around 100,000 at the start of the tournament to nearly 400,000 by July 6; this was based on a seven-day moving average.
The NFL continues to be a driving force behind the growth of prediction market volumes, which saw a significant increase last season. For the opening week of the 2026 season, projections from White Swan suggest that Kalshi could manage approximately $8 billion in maker risk.
In traditional sportsbooks, the operator sets the prices, manages inherent risks, and decides on bet acceptance. Conversely, in a prediction market, customers can create combos and submit requests for quotes where competing market makers respond with pricing. The accepted quote generates a transaction and the maker risks their capital as collateral until the settlement is complete.
For instance, a customer might bet on a scenario where England wins, Harry Kane scores, and over 2.5 goals are scored. Although it resembles a traditional accumulator, behind the scenes, it operates like an auction for risk.
Prediction contracts are now integrated within various fintech, crypto, and fantasy applications, broadening their reach. However, pricing remains a critical aspect that requires careful consideration.
Market makers face capital constraints on how much risk they can accept. For instance, with a parlay priced at 17/1, every dollar staked ties up $17 in collateral until the bet settles. This dynamic means that quick capital turnover can significantly influence returns.
Competition among market makers is essential; if a quote is too short, it risks losing business, while a price that’s too high attracts sharper bettors. Unlike sportsbooks, an exchange's maker only profits from the competition that survives after factoring in competitors’ quotes.
Correlation among match outcomes creates a significant modeling challenge. The likelihood of one event influences another; for example, if France wins decisively, it raises the chances that Mbappé scores and that over 2.5 goals will be achieved. Consequently, market makers must assess how outcomes influence one another across numerous potential combinations in real time.
Financial market makers bring a wealth of capital and sophisticated risk management, but they often lack specialized sports betting models. In contrast, professional betting syndicates have decades of experience in pricing sports outcomes, understanding correlations, and managing risks across multiple bets. To maximize this opportunity, Waterhouse VC is collaborating with a leading professional betting syndicate that combines extensive pricing knowledge with proprietary models and trading infrastructure. The right blend of capital and pricing expertise is paramount to succeed in the evolving landscape of prediction markets, ensuring that market makers can quote effectively across a wider range of markets.
