America’s new love affair with gambling drives Kalshi to $871 million haul on Super Bowl Sunday

Federally regulated prediction market Kalshi handled an estimated $871 million in notional trading around Super Bowl Sunday (Kalshi confirmed >$1 billion in game-related volume), with football now representing roughly 90% of its sports volumes and parlays accounting for about a fifth of that activity per Bank of America. Kalshi’s revenue is reported to have surged from ~$1.8M in 2023 to ~$24M in 2024 and to ~$260M in 2025, and the company reached an ~ $11 billion valuation after a $1 billion funding round; it has distribution deals including Robinhood and briefly hit No.2 on the U.S. App Store. The shift of handle toward events contracts is pressuring legacy sportsbooks (DraftKings, FanDuel) and drawing regulatory scrutiny even as Kalshi argues its CFTC-regulated “events contracts” are structurally distinct from state-licensed betting.

Analysis

Market structure: Prediction exchanges (Kalshi, Polymarket) are the immediate winners — they captured >$1bn Super Bowl flow and Kalshi reports sports = ~90% of volumes, lifting 2025 revenue to ~$260m and implying an ~ $11bn valuation (≈42x 2025 revenue). Incumbent sportsbooks (DKNG, FLUT) are the primary losers as retail wallet-share and promotional capital migrate to exchange-style products that dilute sportsbook pricing power and reduce gross margin on “handle.” Brokers and trading-platforms (Robinhood, SOFI) that embed event markets benefit through higher DAUs and non-interest revenue.

Risk assessment: The largest tail is regulatory reclassification — states or Congress could constrict event contracts or ban high-risk props within 3–18 months, triggering a 30–60% volume shock to Kalshi-style markets; operational tail includes market-manipulation investigations leading to fines and liquidity pullbacks. Short-term (days–weeks) volatility will be driven by headline Super Bowl-style spikes and partnership announcements; medium-term (6–18 months) hinges on CFTC/state actions and NCAA/league lobbying. Hidden dependency: retail flow concentration — a single broker distribution deal (Robinhood) or a liquidity-providing HFT leaving would materially dent spreads and revenues.

Trade implications: Tactical short bias on sportsbook equities and long, small exposure to retail brokers. Expect DKNG/FLUT to face margin compression; consider 6–12 month put protection or outright short sizing. Options strategy: buy 3–6 month DKNG puts (15–30% OTM) or a bearish vertical to limit capital; pair trade idea: long SOFI (0.5–1% NAV) vs short DKNG (1–2% NAV) to express exchange adoption vs sportsbook decline. Entry: deploy within 2–6 weeks to capture momentum; reassess on regulatory updates within 30–90 days.

Contrarian angles: The consensus that prediction markets permanently displace sportsbooks may be overdone — sportsbook incumbents still control in-play liquidity, promotional budgets, and exclusive league data; history (DFS/skinny margins -> consolidation) suggests consolidation benefits incumbents over time. Kalshi’s 42x revenue multiple is a vulnerability — if regulatory noise boosts implied volatility, expect rapid multiple contraction. Unintended consequence: leagues could negotiate exclusive exchange partnerships or taxation that re-entrenches sportsbooks, reversing recent share shifts.

Key Decisions for Investors

• Establish a 1.5% NAV short position in DKNG via outright stock or borrow; hedge with 6–12 month 15% OTM put purchases sized to cover 50% of notional short to protect vs short-squeeze. Target 20–30% downside over 6–12 months or cover if DKNG rallies >20% on quarter-over-quarter revenue beats.
• Initiate a 0.75–1.0% NAV long in SOFI equity or a 6-month call spread (buy 10% ITM call, sell 30% OTM call) to capture distribution monetization of event markets; trim if regulatory guidance (state AG/CFTC statements) within 30–90 days is materially adverse.
• Open a pair trade: long SOFI 0.75% NAV, short FLUT 0.75% NAV to express fintech distribution upside vs sportsbook media/operational headwinds; rebalance if FLUT reports <5% YoY handle growth or if parlays remain >15% of operator handle.
• Buy 3–6 month DKNG puts (15–30% OTM) sized to 1% NAV as a volatility play and to monetize downside if regulators announce restrictions on event-contract-like parlays or if Kalshi-equivalent volumes fall >30% in 90 days; unwind if regulatory risk subsides for 60 consecutive trading days.