00:00We'll head over to a story that you guys have up about Kalshi and Parlays.
00:04No big surprise that Parlays dominate the sports betting market.
00:07How are they doing on the prediction market?
00:11Yeah, Parlays are pretty much the reason that FanDuel and DraftKings were able to become profitable a couple years ago.
00:18Because, you know, there's such high margin bets.
00:20They're long shots and sportsbooks tend to win or they do better when you lose.
00:24So think about a straight bet that someone places on a sportsbook.
00:29Usually about 5% hold rate for a sportsbook.
00:33A parlay, it's about 20%.
00:35So there's a reason that all the promos you get, all the advertisements, all centered around parlays.
00:40Sportsbooks tend to do better when you bet more parlays.
00:43That's why when Kalshi, which is on this prediction market platform, which functions differently than sports betting,
00:49when they came out with their parlay product in late September, early October,
00:54everyone was really interested in how it would work, how adoption would grow.
01:00And we're seeing right now that it's gone from about 2% of weekly activity to about 20% of
01:05all the sports trading on the platform.
01:07So I think one out of every five sports bets placed on Kalshi is now a parlay.
01:12But the big question or the big dilemma, rather, for Kalshi is they're not making any more money from these
01:18bets,
01:18just like sportsbooks do, because the way Kalshi works, the very reason that prediction markets are able to avoid sports
01:25betting laws
01:26and call themselves not betting is also the reason that they don't make more money when people lose.
01:31Kalshi takes about a 1% fee on every trade.
01:35It pairs a bettor up with another bettor to take the other side.
01:40So a straight bet or a parlay means just the same 1% fee for Kalshi versus a sportsbook.
01:46It can maybe mean 20% higher margin.
01:49Another big problem is because it's a peer-to-peer model,
01:53Kalshi has trouble pairing people with other people to take the bet.
01:57It's a lot, you know, on a sportsbook, you can go and build out your parlay,
01:59customize whatever you want.
02:01They have all this technology that prices in risk.
02:04If you do a same-game parlay, it prices in different factors in the game,
02:07which could impact the odds for you.
02:09On Kalshi, you're really just dependent on someone taking the other side of your trade.
02:14So we're seeing that parlays are growing on Kalshi.
02:16There's more people taking those trades out there right now.
02:20I know Kalshi has a request-for-proposal system that it puts out to try to match traders with a
02:25lot of money
02:25to the other sides of these long-shot bets where, you know, it's peer-to-peer trading versus sports betting.
02:31But the big kind of dilemma for them right now is, yeah, it's growing, but it's not making them any
02:35more money,
02:36which is precisely why DraftKings and FanDuel are investing in prediction markets of their own.
02:41You know, we've talked about the products they launched back in December really just kind of look the same
02:46as most other prediction markets right now.
02:48But for those companies, DraftKings just bought a company called RailBird Exchange for about $250 million.
02:55FanDuel plans to spend another $300 million on its prediction market services,
03:01basically to build out its own technology to make sure that it can make more money off these kind of
03:05bets
03:06than right now where parlays just kind of equal the same as a straight bet.
03:10So it's kind of fascinating to see what, you know, the growth is moving.
03:15That's kind of the first step for Kalshi and other prediction markets.
03:17But the second step is that growth doesn't really matter if these bets are, you know,
03:21functionally the same as straight bets.
03:23Certainly, it allows you to be more competitive with your offerings.
03:26You know, you can say, hey, we have parlays too, bet them here.
03:28But for those services right now, A, they're harder to actually do and provide.
03:32And B, you know, the most important part is they're not giving the economic benefit.
03:35So it'll be really interesting to see over the next couple of weeks in March Madness.
03:38I'm sure parlay activity will grow as they keep trying to expand it.
03:42But then when does that next phase hit?
03:44When does DraftKings and FanDuel kind of come in and really try to perfect the product
03:48so it's making them more money?
03:49So, yeah, it's an exclusive we have on legal sports support.
03:51I'd urge you to go check it out.
03:52It's pretty interesting to see how these numbers grow and correlate
03:55and how it's affecting the bottom line of the sports books that are taking your bets.
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