Through two weeks of the NFL season, a popular prediction market isn’t gaining pricing advantages over major U.S. sportsbooks, according to analysis from Citizens JMP Securities.
Key Takeaways
- Kalshi’s implied pricing was higher for moneylines and totals than both FanDuel and DraftKings.
- Citizens JMP Securities doesn’t expect to see sportsbook operators react to Kalshi’s NFL markets.
- Analysis shows that Kalshi is attracting a certain kind of clientele over average bettors.
Using moneyline and over/under totals odds and implied vig, Citizens compared FanDuel and DraftKings, the two market-share leaders in American sports betting, to sports event outcome platform Kalshi’s NFL markets. The data from Friday’s research showed that Kalshi’s implied pricing was 5.12% in Week 2, down from Week 1’s 5.31% but higher than both FanDuel and DraftKings.
“Currently, we do not view betting exchanges as a competitive threat to profitability for existing operators - DraftKings, Flutter (FanDuel), MGM Resorts (BetMGM), Caesars Entertainment, PENN Entertainment (ESPN BET), and Rush Street Interactive (BetRivers) in the legal sports betting states and do not expect to see reactionary promos/marketing as a result.” Citizens JMP said in a statement.
FanDuel’s week-over-week implied pricing rose from 4.43% to 4.47%, while DraftKings’ dropped from 4.51% to 4.48%.
In Week 1, Citizens reported that Kalshi’s pricing was 10% and 25% more expensive than DraftKings’ moneyline and totals markets and 16% and 23% costlier than FanDuel’s. By Week 1 kickoff, moneylines were still 7% more expensive while over/unders were 10% higher.
Evolving markets
Kalshi has been offering sports markets since the Super Bowl in February, but it only recently started allowing customers to purchase NFL spread and totals contracts. Its longest-running markets are the ones that offer “Yes” or “No” on a team winning outright.
Citizens said the two biggest draws to exchanges over sportsbooks are supposed to be improved pricing and cash-out options. However, that is not the case, Citizens says, through the first two weeks of the NFL season. That could change as the markets evolve.
“The NFL season should be some of the most liquid sports markets for Kalshi all year, excluding tentpole events, as we believe these games have the highest wagering per game across any league in the U.S.,” Citizens said. “If we see the spread starting to tighten, it implies the model is working (higher liquidity) and/or Kalshi is offering fewer incentives to market makers. In our view, the spread should narrow as user adoption (and liquidity) improves throughout the football season.”
Kalshi’s appeal
Citizens says Kalshi’s transaction fee is what separates it from the traditional sportsbooks.
The platform charged $1.64 for 100 contracts in Week 2, down from the $1.67 in Week 1. Average bettors are hit with the fee, while “sharps/whales/VIP institutions are often not subject to the fee,” which helps build up liquidity volume in the markets, according to the analysis.
“Overall, we see this model favoring a cohort of players who are more likely than not wagering on offshore books and are not a threat to players using the traditional sports betting apps,” Citizens says.
