Kalshi Is Giving Sportsbooks a Good Run for Their Money During March Madness

An analysis by Citizens Equity Research’s Jordan Bender has suggested that Kalshi’s pricing of the “Sweet 16” and “Elite 8” games in the March Madness competition has been better than that of traditional sports betting rival DraftKings, although the bookmaker still featured the best pricing on the “First Four” games. 

DraftKings Holds Out at the Beginning of March Madness – Kalshi Overtakes It Later

“DraftKings had the best customer pricing across the first four games, but Kalshi had the best pricing for the remaining rounds. Kalshi’s vig was 4.42% and 4.55% in the Elite 8 and Sweet 16, respectively, when blending the moneyline and over/under, followed by DraftKings, and then Fanatics,” Bender explained.

Kalshi has previously argued that it does not offer a sports betting product, but a superior customer-facing option that players organically flock to. What previously sounded like a boisterous self-inflatory statement has now been vindicated in Bender’s analysis; it now appears. 

Kalshi is beating sportsbooks at their own game, it appears, while also managing to stay ahead of the latter group’s prediction market counteroffensives. DraftKings, FanDuel, Fanatics, and Robinhood have all launched prediction markets of their own, but they are still struggling in terms of margins offered, with Kalshi outpricing them.

Bender explains this by the fact that, insofar as sportsbooks are concerned, there is no vigorish to pay – i.e., the fee that the sportsbook cuts off a wager to stay profitable. 

Prediction markets like Kalshi may reduce their own transactional fees (that are not the same as vig) or cut them altogether to incentivize people to bring more liquidity to markets, and thus keep the margins appealing. 

“Kalshi charges a transaction fee on every contract traded on its platform, designed to incentivize liquidity on the order book rather than liquidity removal. In our analysis, this fee averaged approximately $1.58 per 100 contracts in the Elite 8 and $1.65 in the Sweet 16, the driver of improved pricing,” Bender explained.

Prediction Markets Far From Taking Out the Sports Betting Business

But just because the company has had success in one of the largest sports betting events in the United States, it doesn’t implicitly mean that the company would turf out sportsbooks.

Quite the opposite, Bender believes. Prediction markets remain a limited risk to traditional sportsbooks, as players have a much larger swathe of options to choose from. 

Kalshi, on the other hand, is specifically focusing on big events, with established companies now looking for ways to shave their own margins and offer players a better experience overall. 

At the same time, prediction markets continue to face intensifying pressure from local gaming and state regulators.