Before this year’s FIFA World Cup, only three players had ever scored ten goals in a single tournament, and not since 1970. Kylian Mbappé of France achieved this milestone, finishing the tournament with ten goals and securing his second Golden Boot. Lionel Messi of Argentina scored eight goals, while Spain ultimately won the championship trophy. Despite the tournament's expansion, the familiar names remained influential.
In the betting landscape, recreational money often accumulates around well-known players and favored outcomes, leading to increased liabilities when those bets succeed. In late 2024, a successful run of favorites in the NFL resulted in Flutter, the parent company of FanDuel, experiencing an estimated loss of $438 million in gross gaming revenue.
Parlays further amplify this concentration of risk. As mentioned earlier, bettors favor these bundled wagers, as they can transform a small stake into a significant payout. Bookmakers benefit from parlays because they effectively obscure individual margins by combining multiple legs into one price.
Open competition has also entered the fray. Parlays emerged as sportsbooks' premier product by aligning recreational demand with profitable economics. According to The Wall Street Journal, in Illinois, New Jersey, and Colorado, parlays made up approximately 27% of all bets placed but generated 56% of sportsbook revenue.
With operators needing to manage various costs from licensing to compliance, there is a financial incentive to favor high-margin bets, which is where parlays fit perfectly.
Once considered nearly unbeatable, this product faced new competition when Kalshi launched Combos on September 29, 2025. The following day, DraftKings shares fell by 12%, and Flutter's shares dropped by 10%, even though the new product had only seen minimal trading activity. This shift introduced an environment of competition among independent market makers for customer orders and their corresponding positions.
Prediction markets also began reaching customers in states like California and Texas, two of the largest where online sports betting is still prohibited. It remains uncertain whether this access will withstand legal challenges, but demand for these markets is clearly present.
The scale of activity is significant; Bank of America estimates that Kalshi handled roughly $125 million in trades for each World Cup match. Even on a non-eventful Sunday, its trading volume was about $945 million (Ticker Tracker). It's important to note that these figures reflect both sides of every contract at their face value, making them notional amounts rather than direct sportsbook revenue.
During the World Cup, Kalshi's same-game parlay risk per match indicated the potential maximum payout a market maker would face if all components of a combo were successful. At the tournament's start, approximately 100,000 daily combo creators participated, increasing to nearly 400,000 by July 6, according to data from White Swan Predicts.
The NFL is predicted to significantly boost the volume of prediction markets going forward. For the opening week of the 2026 season, White Swan forecasts that Kalshi could see around $8 billion in risk flowing through its venues.
Operators in a sportsbook establish prices, manage risks, and choose to accept bets. Conversely, on an exchange, customers design a combo and submit a "request for quote." Competing market makers reply with prices, and the most favorable quote is chosen. If accepted, the maker assumes the other side of the bet and locks in their maximum loss as collateral until the bet is settled.
A bettor might construct a combo involving England winning, Harry Kane scoring, and over 2.5 total goals. To the user, this looks like a traditional accumulator, but it is, behind the scenes, an auction for risk.
These prediction contracts are now appearing in fintech, crypto, and fantasy sports applications, which allows for a wide-reaching customer base. However, each combo still requires an accurate pricing mechanism. The exchange facilitates the distribution, while market makers provide the financial backing and price setting.
Capital limits dictate how much risk a market maker can underwrite. For example, at a parlay price of 17/1 (or 18.0), every $1 placed by a customer locks up $17 in collateral until the contract is settled. This outright can tie up funds for extended periods while a same-day combo might release them more quickly. Therefore, returns depend not only on pricing effectiveness but also on the efficiency of capital turnover.
Competition plays a crucial role here. If a maker sets a price too low, the order may go to competitors. Conversely, a high quote can lead to sharp bettors capitalizing on the pricing discrepancy. Unlike sportsbooks that set their own parlay margins, market makers on exchanges can only earn what remains after competing offers.
Correlation introduces additional challenges, as outcomes within a match are interconnected. For instance, if France wins comfortably, it’s likely Mbappé has scored, increasing the chances of hitting over 2.5 goals. Market makers must evaluate how each possible outcome influences the probabilities of others across countless combinations in real time. Simply mirroring sportsbook lines isn't viable, as those often incorporate the bookmakers' margin and strategic choices.
Market makers predominantly short the same public favorites, meaning that a single result can trigger the settlement of multiple related combinations simultaneously. Thus, the challenge lies in pricing not just individual legs in isolation, but managing the entire distribution of outcomes.
There’s significant potential ahead. Financial market makers bring necessary capital and systems, yet they often lack the specialized sports modeling required for effective pricing. Professional betting syndicates possess extensive experience in pricing sports and managing risk across numerous markets. Given the capital to compete, they are in a prime position to capitalize on value in prediction market combos.
Waterhouse VC is collaborating with a prominent professional betting syndicate to tap into this opportunity, combining years of experience in pricing complex wagering risks with specialized sports models. It’s crucial to have both capital and pricing expertise; without the former, there’s limited ability to quote, and without the latter, scaling remains a challenge. Since each quote must be fully collateralized, increased capital allows for greater quoting capacity and the opportunity to deploy pricing advantages across additional markets at larger scales.
