Kalshi might have just cleared the way to offer user-created parlays, self-certifying a new type of contract that includes multiple parts and payouts determined by multiplying the odds of each component of the bet.
The prediction market submitted a new contract, which appears to be designed for bets on multiple outcomes, to its regulator, the Commodity Futures Trading Commission (CFTC), for self-certification Tuesday.
The contract’s title with the CFTC — “Will <outcomes> occur in <events>?” — is vague, even by the standard of self-certification filings that are based on a template.
However, elements of the filing suggest that the self-certification is meant to cover multi-leg bets.
Bet on multiple ‘components’
The filing refers to bets made up of multiple “components,” and suggests that these components may be individual Kalshi contracts, each settled by their own rules.
It goes on to say that a bet on yes “will pay out the product of the payouts for each <component>, as dictated by each corresponding <rule>, rounded down to the nearest cent.”
Payment based on the product of multiple different components appears consistent with parlays, as payouts for a non-correlated parlay at a sportsbook are calculated by multiplying the odds of each component part.
This would allow Kalshi to ensure that there should be a high level of liquidity — trade offers at competitive prices on both sides of the bet — on its parlay markets, without needing to ensure that there is a liquidity provider (also known as a market maker) offering trades on every permutation of outcomes that could occur across an NFL weekend.
As long as each component market has a sufficient level of liquidity, and all of the events in the bet are independent, Kalshi can use this mechanism to multiply the odds of existing bets — just like a sportsbook would — rather than having to find parties that would put up liquidity for the parlay itself.
Kalshi has technically offered parlays before. During the Oscars and Grammys, the exchange took bets on specific sets of events occurring. However, those contracts were pre-designed and were priced individually, with low liquidity on most options as a result.
But by self-certifying multi-leg contracts that pay out the product of the odds of its component parts, Kalshi could allow users to build their own parlays, and ensure that they should be more liquid.
May not cover same-game parlays
However, this payment format would not be suitable for same-game parlays, where outcomes can be correlated. For example, a bet on Saquon Barkley scoring a touchdown and the Eagles to win during Thursday’s NFL opener should likely be priced at lower odds than the product of the two component parts, as a Barkley touchdown makes it more likely that the Eagles win.
As a result, Kalshi may plan to roll out this contract primarily for parlays that occur across multiple games.
Correlated events are harder for exchanges to price, as in this case they would need someone to provide liquidity for the parlay itself, not just its component parts. They may be able to offer markets for specific, popular combinations of events — such as a team to win and its star player scoring a touchdown. However, it is more challenging to find a way to allow users to build their own same–game parlays with a large degree of freedom, while still ensuring that there is liquidity available for their planned bets.
The definition of “outcomes” includes a wide-ranging list of occurrences that can happen during a sports game or season.
“Outcomes may include game outcomes, player statistics, team statistics, championships, awards, season statistics, playoff outcomes, draft outcomes, and milestones,” the filing said.
It is not clear whether Kalshi plans to self-certify a similar wide-ranging market title that would cover a payout criteria better suited to same-game parlays.
Other parlay challenges
There are other challenges for Kalshi to overcome in actually listing parlay markets. If a market maker takes the “no” side on a large number of long-short parlays, under current rules it would have to put up an extremely large amount of money — enough to cover all of the parlays winning — which it would have close to zero chance of paying out in its entirety.
Some other CFTC-regulated exchanges allow for trading on margin — effectively letting participants borrow money to trade — but this could be more controversial in a product that many argue is a form of sports betting. Alternatively, former Kalshi employee Adhi Rajaprabhakaran wrote in a recent edition of the 50 Cent Dollars newsletter that introduction of a “risk engine” could allow for market makers to only put up cash for “the realistic resolution states that actually matter.”
Parlays are big-money opportunity
Parlays are an especially lucrative revenue stream for traditional sportsbooks. According to Casino Reports data, parlay hold in states that report this data hit an eye-watering 25.8% in June. Non-parlay hold was 6.7%. Parlays make up the majority of betting revenue in most months, with their share of the overall market continuing to slowly creep upward.
Rival prediction market Polymarket has also been figuring out how to offer more parlays as it prepares to relaunch in the U.S. The exchange opened a new Discord channel on Monday to solicit “parlay ideas,” with rewards for those who suggest parlays that ultimately are listed on the site.
Kalshi said it could offer these contracts as soon as the close of the business day Wednesday. Before that point, the CFTC could step in if it believes the contract to be contrary to the public interest. However, in practice, the CFTC does not typically do so. CFTC Acting Chair Caroline Pham noted that the regulator has never denied or taken action against a self-certified market in its 50-year history.
However, the exchange does not always launch contracts on the date mentioned in a self-certification filing. Last month, the exchange self-certified to offer contracts on point spreads, totals, and touchdown scorers. While it quickly started taking bets on the first two categories of market, its player-related contracts have not gone live yet, as it plans a slow rollout of these markets.
Kalshi hopes to have NFL player prop markets up in time for the NFL’s Week 1 this Sunday, but they are not live yet.
The trading prohibitions for the contract — a list of people who would not be permitted to bet due to risks of manipulation — suggest that it is intended to cover both the NFL and college football.
If Kalshi wishes to include other statistics — such as yardage or quarterbacks’ passing touchdowns — as part of its parlays, then it may need to self-certify those markets separately.
A Kalshi spokesperson did not respond to InGame’s request for comment.
