The addition of sports parlays by the former could exacerbate the already intense rivalry between traditional bookmakers and prediction markets.

Although they don't yet provide parlays, companies like Kalshi and Polymarket presently offer yes/no contracts on athletic events, which are similar to moneyline bets.  However, they can have a valid cause to enter the legged sports betting industry.

Sports parlays are one of several areas where prediction markets should grow, according to a recent research by cryptocurrency venture investment firm Pantera Capital. These wagers are described as "high leverage" affairs that offer "high market outcome value" while luring traders to return.

Pantera, on the other hand, placed sports wagers in the low leverage/low market outcome value category.  Pantera ranks moneyline bets higher than daily fantasy sports (DFS), which haven't been explored much as a potential market for prediction exchanges. However, DFS isn't likely to be as profitable for prediction markets companies as parlays would be.

Parlays May Be Essential to the Success of Prediction Markets

It's reasonable to think that this tendency would extend to prediction markets given that parlays have a track record of increasing revenue and profit for traditional sportsbook operators.

"Users want to have high leverage or stack odds to increase payouts. Parlays, perps, intraday event markets –– all of these prediction market products have the potential to increase demand for prediction market events,” notes Mason Nystrom, junior partner at Pantera.

Prediction markets can capitalize on the gamification of betting and trading that younger market participants have learned to adore by providing parlays, including sports-related ones. They may also realize better economics by building a more loyal customer base.

“Having more recurring markets will also create better economics for the platforms, enabling them to list more markets, pay for customer acquisition, or otherwise be more competitive,” adds Nystrom. “This already occurs in sports betting, where platforms like DraftKings utilize DFS (daily fantasy sports) as a valuable acquisition and retention tool to foster habitual user behavior.”

An analysis of values for various markets for prediction market firms.

High-Outcome Value Is Important

Prediction markets acquired popularity in this country mostly due to US election betting, and some of the operators, like Polymarket, have a talent for profiting from viral events.  But since elections are rare and contentious or viral events are transient, prediction market operators are probably forced to concentrate on growing their offers that yield high result value.

Sports parlays check the high result value box in addition to intraday events and climate markets, among other things.  A new wave of prediction market adoption, increased regulatory scrutiny, and increased competition from the gaming industry could result from Kalshi, Polymarket, and others venturing into parlays.

“The rebirth of prediction markets will leverage efficient markets to generate valuable prediction insights and offer a form of leveraged entertainment to the same customers who trade individual stocks or bet on sports,” concludes Nystrom. “We’re about to see an explosion in the types of markets and things that people will bet on. Markets for everything are coming.”