Kalshi’s Same-Day Parlay Launch Shakes Betting Stocks

The first day of offering same-game parlays barely made a dent in Kalshi’s bottom line, but the launch was enough to trigger a ripple effect on the sports betting industry. The new product generated less than $2,000 in fees, yet DraftKings and Flutter Entertainment shares lost $7 billion in market value in total.

1,229 Recorded Trades with $1,762 in Fees

Kalshi introduced its “build your own” parlay feature Monday afternoon, right on time for the  NFL’s pair of Monday Night Football games, marking the company’s official rollout of multi-leg bets since it self-certified to offer them in August. Prior to the launch, the company had only tested several pre-set parlays around the time of the season opener.

The system works differently from a traditional sportsbook, allowing users to piece together a parlay, such as a game winner or a point total, and send it out as a request for pricing. Next,  institutional market makers step in and set the odds, oftentimes providing rebates as incentives.

In terms of volume, the first day was relatively small, with around $256,000 in multi-leg contracts traded, resulting in 1,229 trades and $1,762 in fees, which accounted for approximately 0.2% of the total activity on the exchange. Still, one parlay combination generated 21 separate trades, showing at least a spark of early interest.

Tumbling Shares: DraftKings Down 12% Tuesday, Flutter Slid 10.3%

Sportsbooks heavily rely on parlays for revenue, with multi-leg bets accounting for more than 50% of the revenue and roughly a quarter of the handle in some states. FanDuel and DraftKings have been using same-game parlays to push their betting margins above 10%. However, Kalshi now poses a threat to them with its similar product with better pricing.

Investors were quick to notice and take act, leading to DraftKings’ shares dropping 12% on Tuesday, with the stock closing down 11.6% at $37.40 and erasing $2.5 billion from its value. Since late August, the stock has lost nearly 23%, cutting more than $5.5 billion in market cap.

Flutter, FanDuel’s parent company, went down 10.3% to $254.00, losing $5.5 billion on the day and about $10 billion since the end of August. Its stock was also pressured by speculation over higher gambling taxes in the U.K., its second-largest market.

The $7 billion wiped out in a single day is more than double the market hit caused by Illinois’ surprise betting tax hike earlier this year, a sign that Wall Street considers Kalshi’s move a serious challenge.