I'd Buy That For A Dollar
Sportsbooks use handle. Prediction markets use trading volume. But these are not the numbers that matter.
The Bulletin Board
THE LEDE: Trading volume and betting handle are not important numbers.
BEYOND the HEADLINE: Kalshi Trading is losing money… So what.
WEEKEND CATCH-UP: Florida AG wants stiffer penalties; Kalshi’s new parlays; Missouri launch day is here.
VIEWS: The UK tax hike has landed, and it’s bad news for online casinos.
AROUND the WATERCOOLER: Kalshi’s very bad week.
STRAY THOUGHTS: Vixio’s look ahead to 2026.
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The Lede: Kalshi Trading Volume Hits $5B In November
The following chart was posted by the KalshiData X account, showing trading volume (the number of contracts sold) at 5 billion in November, and with every contract counted as $1 the math is pretty easy:
Two things really stand out.
First, Kalshi is clearly centering sports, as the start of the NFL season has seen its cumulative contracts sold since launch jump from 6 billion to 19 billion in three months.
Second, good for Kalshi, although as a new entity operating in 50 states with mountains of paid and free advertising, I would have expected the growth to be even larger.
Here’s the problem: We still don’t know what this number represents. It’s the same gripe I have with traditional sportsbooks’ use of handle as a metric of overall interest/growth or success, it just doesn’t work.
For those that don’t know, here’s what trading volume on prediction markets represents: Every contract is counted as $1, so when someone buys 100 contracts of [insert team name] at $.33, someone else (the market makers) are taking the other side. If that person then sells [insert team name] for $.60 at halftime, the volume would increase by another $100, for a total of $200, even though the actual cash changing hands was just $33 on the buy (what the trader paid) and $60 on the sell (what the trader received). If this was a sportsbook it would look like the bettor wagered $33 and took an early cash out to pocket $60.
Handle is cleaner, as every $1 represents a wager from a customer. Still, it’s far from clean. Reason being, bets get recycled, and with hundreds of millions in promo dollars floating around, it’s hard to know what is deposited and wagered dollars, and what is phantom money.
The numbers that would tell us if the ecosystem is 1) sustainable and 2) thriving are net gaming revenue (NGR) and customer deposits.
NGR is basically the platform’s profit after paying out winnings to bettors—think of it as total bets placed minus payouts to winners, minus any fees or costs.
Customer deposits are a strong sign of ecosystem health, especially in peer-to-peer gambling where bettors wager directly against each other, or in the case of prediction markets with other bettors or institutional market makers. If deposits are growing, the ecosystem is thriving with active participation. If new deposits aren’t keeping up with withdrawals, there is a churn problem.
The problem P2P gambling has always had is that the sharks don’t care about the ecosystem’s health; that’s the operator’s problem. They’re not into sustainable fishing. They’ll fish until there’s nothing left, leaving the pond empty and the operator scrambling to restock it (at massive costs).
As I’ve previously noted, PokerStars was masterful when it came to “juicing” numbers:
“From numerous conversations I’ve had over the years, it’s clear that PokerStars, and the industry as a whole, were fixated on traffic numbers (dutifully reported by PokerScout) and hosting the biggest tournaments. If a competitor began to close the distance between itself and PokerStars’ top spot, Stars would dish out bonuses to lure customers back, effectively juicing their cash game and tournament numbers.
“Outside of the optics (which can matter a lot), the growth was meaningless.
“It was a way to pull players from competitors and reactivate lapsed customers. These gains were short-term jolts; they weren’t sticky.”
Which leads into the next header…
Beyond the Headline: Kalshi Trading Is a Loss Leader?
After getting hit with a national class-action lawsuit, Kalshi cofounder Luana Lopes Lara took to X, saying in part:
“Kalshi is an exchange. It’s peer-to-peer and there is no house. Anyone can place orders and trade against anyone else, whether it’s a person or an entity. Like any financial exchange, we have market makers that compete openly against each other and help bootstrap liquidity… Yes, one of the participants on the exchange is our affiliate, Kalshi Trading. This is a common and regulated practice in our industry, which helps provide liquidity for a better user experience. Many financial exchanges have similar setups, especially for new products.”
The part most people zeroed in on was Lopes Lara’s admission that Kalshi Trading isn’t profitable, and according to Lopes Lara, “On sports markets this month, Kalshi Trading is less than 6% of the making volume.”
That Kalshi Trading isn’t profitable doesn’t mean much.
First, it’s not profitable now. As Brett Maverick (Mel Gibson) says in the movie Maverick, “I promise I’ll lose for at least an hour.” This isn’t some altruistic company propping up prediction market customers, long-term the goal is to make money; it said as much in its CFTC filing.
Second, as I noted in the previous section, sometimes it’s in a company’s interest to lose money, and Kalshi Trading filling orders during a period where the parent company is scaling seems like a good time to deploy that strategy.
As NoVig’s Head of Trading, Chris Dierkes, tweeted:
And third, what is “the house” is another attempt at muddying the waters (as is calling Kalshi Trading an “affiliate”). As I said on X in a discussion between Alex Kane and Alfonso Straffon, the setup has all the hallmarks of a third-party prop player/bot agreement:
Weekend Catch-Up: Florida AG Wants Steeper Penalties; Kalshi’s New Parlays; Missouri Launch Day
Florida AG calls for stiffer illegal gambling penalties [The Floridian]: In an X Post, Florida Attorney General James Uthmeier called on the legislature to “increase penalties for illegal gambling operations from a misdemeanor to a felony.” As The Floridian noted, there are multiple bills seeking to increase penalties on illegal gambling: “Notably, the Florida Legislature has sponsored a bill looking to safeguard the state’s gaming industry from illegal activity. The bill was sponsored by Sen. Jennifer Bradley (R-Fleming Island) in the Senate in October. A similar bill, HB 189, was sponsored by Rep. Dana Trabulsy [previous STTP coverage] in the House last month.”
Kalshi will offer parlays on elections and economics [InGame]: This story got lost in last week’s tidal wave of prediction market news: “Kalshi has self-certified parlays on political or economic outcomes and may soon start offering those bets, a new filing with the Commodity Futures Trading Commission (CFTC) shows.” STTP Thoughts: It’s comical to me how people think something popular in one arena is also going to be popular in another. People will certainly bet on these, but this is quite different than sports parlays that are decided within a three-hour game.
Missouri sports betting launch day [Press Release]: Today is Missouri sports betting launch day, and here is how one operator has kicked things off in the Show-Me State. One operator, Caesars, went live with its Caesars Sportsbook mobile app at midnight and opened two in-person sportsbooks (Harrah’s Kansas City and Horseshoe St. Louis) this AM. There will be eight online operators in Missouri and 13 retail sportsbooks (more on that here), but the reason I picked Caesars is because their PR team is really good at not just sending information, but building a relationship, kudos to Brad and team.
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Views: UK Tax Hike Is Real and It’s Spectacular(ly High)
The long-anticipated tax hike in the UK has finally been revealed, and it’s pretty much the online industry’s worst nightmare come to life.
The tax on all forms of online casino gambling was increased from 21% to 40%.
Additionally a new 25% tax on online sports betting was added — retail sports betting remains at 15%.
Meanwhile the retail sector and racing were either unaffected or will benefit from the changes:
The tax on horse racing (online and retail) and retail terminals is unchanged
The 10% tax on retail bingo will be eliminated in January
As the team at Regulus Partners noted, the 67% tax increase on online betting “is a tax increase that will have negative long-term consequences, but it is a Parliamentary fiscal win for the short-term, and the sector had to take something – so fair enough.”
“Generosity is likely to reduce… which will still encourage Black Market leakage from bonus seekers,” Regulus said in a note.
When it comes to the online casino tax increase, the “fair enough” attitude on the sports betting rate disappeared:
“By contrast, increasing RGD by 19ppts or 90% to 40% of GGR is self-defeating political theatre, in our view. At 40% of GGR, any level of bonus generosity becomes too expensive to offer in a large unitary market like the UK… handing an enormous win to the Black Market… Customers looking for bonuses will now have to use the Black Market and nearly all online gaming customers look for bonuses.”
But as (newsletter sponsor) Eilers & Krejcik’s Alun Bowden noted on LinkedIn, there is a delicate balancing act that needs to be walked:
“Tough balance for the listed operators to make in messaging around the 40% tax rate. Too confident of mitigating it and you leave yourself open to more tax rises, too worried and you spook the market… Raising taxes on vice industries is the political equivalent of a quick drink after work. Sure sometimes you just do one, but most of the time you really get a taste for it and before you know it everyone is battered. Just saying, now is not the time for a strong chin and a brave face. A few tears will go a long way here.”
STTP Thoughts: Fighting tax hikes on vices like gambling is a losing battle. The best case scenario is you kick the can down the road. The worst-case scenario is you destroy goodwill. As frequent podcast guest Kim Lund noted on LinkedIn, “It’s easy to imagine a regulator taking the position that this industry should not be able to afford many of the marketing initiatives currently in the mix.”
And as I’ve said many times (including the newsletter linked below), tax hikes and onerous burdens are a feature not a bug.
You can complain that they are gifts to the black market, but most of the lawmakers willing to raise gambling taxes are fine with that, because it’s no longer their problem, the fault is now on the customer who is choosing the black market site.
Around the Watercooler
Social media conversations, rumors, and gossip.
If the gambling industry was last week’s Macy’s Thanksgiving Day Parade, Kalshi would have been Woody Woodpecker with Mr. Pitt holding the strings.
To say it was a rough week for a company that recently raised money at an $11 billion valuation would be an understatement.
Here are a few of the headlines from the last week:
Nevada judge dissolves Kalshi’s preliminary injunction
Polymarket is closer to launching in the US (and got a feature segment on 60 Minutes last night)
Robinhood and Susquehanna have announced a joint prediction market project
A national class-action lawsuit was filed against Kalshi (article from FOS and social media brouhaha here and here)
Let’s try to put these stories into perspective. As I see it, there are three puzzles Kalshi needs to solve.
First, it needs to prevail in court, which is starting to look like a steeper climb, considering the news out of Nevada, and previous rulings which haven’t gone in Kalshi’s favor.
Second, assuming it does win in court, that’s when things get quite interesting, as it needs to beat the competition that is forming a queue behind it: Robinhood, DraftKings, FanDuel, Polymarket and all the rest, while also trying to pull market share from traditional sportsbooks and DFS sites.
“Legal battles, like Kalshi’s recent court victories, might open doors, but they’ll also invite more, and bigger, players into the prediction market space, which means more money spent on marketing and more scrutiny.
“When the giants arrive, first-movers like Kalshi could find themselves squeezed. For platforms like Kalshi, the cost of doing business will suddenly skyrocket, potentially eroding any first-mover advantage. ‘Thanks for footing that eight-figure legal bill, now step aside and let the grown-ups take over.’”
And finally, while class-action suits are a dime-a-dozen, the one filed over Thanksgiving weekend points to a continuing shift in the zeitgeist when it comes to betting. If you lose the public you can be assured that lawmakers will step in and that’s when the regulatory guardrails get erected.
I also think there is a little more there there than usual, considering Kalshi’s legal-regulatory statements compared with its marketing.
As one X user called it: “The gap between ‘what product are we legally’ and ‘what product are we vibes-wise in our ads.’”
And as Daniel Wallach noted:
Stray Thoughts
I was invited to contribute to Vixio’s (a newsletter sponsor) Compliance Crystal Ball 2026 on prediction markets (as was Dustin Gouker). My topline takeaway was the following:
“Supreme Court involvement might settle enduring questions on digital ‘bet location,’ impacting not just prediction markets but crypto, online poker, esports betting, and more.”
You can read my full thoughts here, as well as thoughts on everything from cybersecurity to Responsible Gambling to AI from some of the sharpest minds in the industry.