Prediction markets like Kalshi and Polymarket are supposed to be about forecasting elections, sports outcomes, and other events. Lately, though, the action has shifted to something much flashier: multi-leg combo bets - wagers that hinge on several things happening in a specific way.
These bets are everywhere right now. And they are burning through ordinary customers' money fast.
Data from Bloomberg, focusing on "taker" transactions, shows that Kalshi bettors have collectively lost $294 million on these multi-leg wagers since the start of the year.
The odds are stacked even higher on the most popular combos. At the World Cup final featuring Spain versus Argentina, over 30,000 distinct same-game combo bets were placed by users.
The lure of a giant payout from a tiny bet is hard to resist. One popular World Cup combo had an implied probability of just 2.7% at kickoff - Spain leading at halftime, Argentina winning, and either team scoring two first-half goals.
It is that most retail bettors have no idea how to price these things correctly.
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"The public loves them because the public is very easily confused about all the hidden correlations and what the value might be," said Matt Buchalter, an actuary from Canada who operates the blog Plus EV Analytics.
When you stack multiple events together, the probabilities multiply fast. Hidden correlations - like the complex calculation behind a parlay that needs top-ranked tennis player Jannik Sinner to win the match, claim the first set, and record over 10 aces - make accurate pricing nearly impossible for the average person.
Leonidas Mastrokostas, aged 26 and previously employed at FanDuel, now brings in seven figures each month by wagering against average users on Kalshi. He and other sophisticated traders act as "market makers" - offering prices that retail bettors can take, just like a sportsbook does.
"These lottery tickets are what retail is really looking for," Mastrokostas said. "They don't quite understand the pricing, but at the end of the day, given the competition of many makers there, they'll ultimately lose less."
Now anyone with a good algorithm can join. A 36-year-old software engineer from Los Angeles, Gianni Settino, manages request-for-quotation trades as a side venture. "If everyone's using the exact same algorithm to come up with a price, you're never going to reach the user," he said. "You have to find spots where you can be more competitive."
Flutter Entertainment, the parent company of FanDuel, openly talks about the profits. "It's great we're making money today from offering this capability, particularly focused on combos and leveraging the pricing expertise we have," said Rod Coldrake, the company's CFO.
The explosion of combo bets on prediction markets is another reminder that when you place a bet against a professional, you usually fund their paycheck.
These products might cause issues for the exchanges, as users can quickly deplete their funds, leading them to abandon the platforms.
Prediction markets are still young, and competition among market makers is heating up. That could drive better pricing over time - Settino's comment about finding "spots where you can be more competitive" suggests the pros are already working on it. But for now, the numbers do not lie.
The same hidden correlations that make these bets exciting also make them easy to misprice - and the ones doing the pricing are not the ones losing money.
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