Bernard Marantelli offers a direct perspective on the operations of sports prediction markets in the U.S., referring to Kalshi as a sportsbook, albeit without an internal risk management team. As the founder of White Swan Data, a firm engaged in market-making on prediction exchanges, he articulates a critical distinction: sportsbooks utilize traders to manage bets and exposure, while exchanges provide an API for firms to compete in pricing and liquidity provision.
"Here’s an API. Bernard and 88 other people can market-make all these request-for-quotes (RFQs)," Marantelli explains, highlighting the specialized roles within the trading community. Some participants may focus exclusively on esports, while others cover numerous markets or specialize in same-game parlays. Yet, fundamentally, it operates like a sportsbook.
This underlying structure remains largely unseen by retail customers, who interact with what appears to be a peer-to-peer trading environment. However, the reality is that significant market depth relies on consistent liquidity from professional firms rather than sporadic retail participation.
White Swan Data, based in London, commands a substantial presence in these exchanges, reportedly contributing to 40% of activity in some secondary markets, particularly in the RFQ and parlay sectors. Marantelli notes, "Just better margins… it’s more defendable. It’s the area that fewer people can do well. So I think it’s more defendable margin, more ability to get long-term contracts and beneficial positions."
While individual bets, or singles, can yield profits, mastering parlay pricing demands that market makers accurately assess the relationships among multiple outcomes, necessitating a dynamic response to requests. This expertise, Marantelli states, is honed from years spent in competitive sports betting.
Marantelli sees White Swan alongside Susquehanna as major players in the parlay market, with other firms like Jump Trading, Mojo, and DL Trading also making notable contributions. Various smaller syndicates operate at lower scales, managing between $5 million and $10 million and catering to niche markets.
In the U.S. arena, Enda Kendrick, CEO of the service provider Veltium, reports that large betting groups from the UK and Europe have rapidly expanded into these markets. He identifies over 100 smaller entities, from solo traders to teams of about ten, eager to tap into the regulated U.S. environment.
However, the professional presence complicates the perception of prediction markets as a simple exchange of opinions among users. Kendrick argues that two average customers would struggle to wager millions on teams like the Philadelphia Eagles without the backing of institutions capable of placing substantial capital.
Marantelli warns that the exchange model could lead to faster losses for customers compared to traditional sportsbooks. Though the ability to enter and exit positions seems flexible, it may encourage users to overcommit their funds. A bettor might purchase a contract at a price of 55 or 56 cents, expecting it to rise, but if it falls to 45 cents, the reluctance to accept a loss could lead to deeper financial issues.
"People will lose money faster on exchanges for lots of reasons," Marantelli remarks. "It inherently increases spend, volatility… you’re playing against a sharper audience than you’d face at the DraftKings sportsbook." He relates this to sportsbook cash-out features that allowed users seemingly more control but often resulted in increased expenditure. Exchange customers, however, might find themselves competing against specialists focused on accurately assessing contract pricing.
Kendrick draws parallels with the early days of betting exchanges, where retail liquidity allowed a variety of market makers to profit. As this retail base dwindled, sharper firms began to face off against each other, reminiscent of a poker game where stronger players can dominate if the weaker ones exit.
Despite this caution, the U.S. market presents considerable opportunities, and player recruitment remains vigorous. Marantelli notes that Kalshi saw a fivefold increase in clients during the World Cup, and predicts that NFL prediction markets could generate between $5 billion and $7 billion in liabilities within a week. Still, he acknowledges that rapid losses by customers might threaten the long-term viability of the model if player recruitment stalls.
"If the recruitment of players dries up, then what are you going to do?" he queries. Currently, growth allows for multiple market makers to thrive, and while Marantelli anticipates that margins will remain favorable during this growth phase, he expects competition will eventually compress them. More intricate markets like RFQs and parlays might offer some protective measures against this compression.
What’s emerging is less a scene of individuals casually trading predictions and more an outsourced sportsbook trading room. Exchanges provide the platform and recruit the customers, while specialized firms handle the risk assessment and capital necessary to sustain the market's functionality. In Marantelli’s words, "Let’s call a spade a spade."
