Combo contracts, which require all components to win for a payout, have become increasingly popular on prediction markets like Kalshi and Polymarket, especially with the onset of the NFL season. In September, combos accounted for over 50% of notional volume on Kalshi and nearly 50% on Polymarket U.S.
However, the Commodity Futures Trading Commission's reporting requirements mean that these contracts can inflate perceived trading volumes. For instance, while combos represented 58% of Kalshi's trading volume, they only made up about 13% of total transactions.
This discrepancy arises because the platforms report all trades as $1 of notional volume regardless of the actual cash wagered, leading to potentially misleading comparisons with traditional sportsbooks. Analysts have pointed out that investors may misinterpret these figures, believing that prediction markets have surpassed sports betting in scale.
Kalshi and Polymarket are advocating for alternative metrics, such as taker volume, which may provide a clearer picture of actual trading activity. The rise of prediction markets is contributing to significant stock declines for traditional sportsbooks like Flutter Entertainment and DraftKings, which have seen their stocks drop 70% and 45%, respectively, over the past year