📊 Kalshi Wants to Be Your Insurance Company

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Here’s what we got for you today:

•  🏦 Kalshi partners with sports insurance broker Game Point Capital for institutional hedging

• 🥸 Can prediction markets solve government fraud?

• 🥗 Polymarket opens free grocery store in New York yesterday

• 📈 Market Moves

• 📊 Odds & Ends

Kalshi just announced a partnership with Game Point Capital, a sports insurance broker that writes hundreds of millions in coverage annually. Last week, Game Point used Kalshi to hedge two basketball-related performance bonus exposures - the kind of trades that would normally go through Lloyd's of London or another OTC reinsurer. It's the clearest example yet of prediction markets functioning as institutional risk-transfer infrastructure, not just retail speculation.

The mechanics are straightforward. Sports teams routinely structure large payouts tied to on-field milestones - making the playoffs, advancing a round, winning a championship. Insurers like Game Point underwrite that risk, then lay it off through reinsurance. Traditionally, that means negotiating 1:1 with Lloyd's or a similar counterparty, where pricing is opaque and the reinsurer gets to be selective about which risks they'll touch. Volatile, higher-probability contracts often come back with quotes that are prohibitively expensive.

Game Point's two Kalshi trades illustrate the gap. One hedge covered a bonus triggered if a team makes the postseason - Kalshi priced it at 6 cents, versus 12 to 13 cents OTC. The other covered a second-round advance at 2 cents on Kalshi, compared to 7 to 8 cents through traditional channels. That's roughly half the cost in both cases, and the pricing is visible to anyone watching the order book.

The exchange model only works if there's enough liquidity on the other side. A year ago, these trades probably couldn't have been executed on Kalshi at meaningful size. But sports volume on the platform has scaled fast - Kalshi topped $1 billion in daily trading volume on Super Bowl Sunday, per the Guardian, and Mansour claims the platform could have absorbed a $22 million trade during the game without moving the price. Whether that specific number holds up to scrutiny, the directional trend is real: there's genuine depth in Kalshi's sports book now, enough that an institutional broker is willing to route through it.

Mansour says Kalshi expects to process tens of millions in similar hedges from Game Point alone in the coming months. If that materializes, it starts to reshape how the industry talks about sports event contracts. The regulatory fight over whether these are "gambling" or "financial products" has been largely theoretical - Massachusetts courts say gambling, the CFTC framework says derivatives. But when an insurance broker is using the platform to lay off actuarial risk at better prices than Lloyd's, the "financial product" argument gets a lot more concrete. It's harder to call something a casino when the counterparty is a licensed insurance company managing its balance sheet.

The real question is whether this stays niche or scales. Game Point is one broker. The sports insurance market sits somewhere in the high single-digit billions annually, with industry estimates projecting roughly a doubling over the next decade. If Kalshi can capture even a small slice of the reinsurance flow - not the retail speculation, but the institutional hedging - it would validate a business model that doesn't depend on the regulatory fate of consumer-facing sports contracts. That's a smarter long-term bet than fighting state gaming commissions one courthouse at a time.

PREDICTION MARKETS CAN SOLVE GOVERNMENT FRAUD 🥸

A Washington Post op-ed published today argues that prediction markets should be pointed at government spending as a fraud detection tool. Julia R. Cartwright at the American Institute for Economic Research lays out a three-step framework: publicly disclose all government contracts above a threshold in a searchable database, authorize platforms like Polymarket and Kalshi to list instruments that pay out if fraud is later confirmed by an inspector general or the Justice Department, and set aside a portion of each contract as a fraud bounty to fund the payouts. Anyone with information - contractors, auditors, analysts, insiders - trades on what they know, and the resulting price becomes a live signal of how suspicious a given deal looks to the people paying closest attention.

The core logic borrows from how Enron actually got caught. It wasn't an inspector general or a compliance office that exposed the fraud, but it was investors like Jim Chanos who saw the numbers didn't add up and made hundreds of millions betting against the firm. Government contracting has no equivalent mechanism. There is no continuous signal indicating whether a $300 million contract is clean or rotten. Oversight is episodic and backward-looking, and by the time fraud is formally detected, the money is gone. The current enforcement apparatus of inspectors general, the Justice Department, the False Claims Act's whistleblower provisions, catches roughly 3 percent of total fraud by generous estimates. The rest disappears into the noise.

The timing of the op-ed is pointed. This lands the same week Kalshi CEO Tarek Mansour faced questions about insider trading on his platform, and not long after the AlphaRaccoon controversy where one Polymarket trader's suspiciously perfect predictions on Google's Year in Search sparked accusations of insider knowledge. Cartwright's argument flips the usual criticism on its head: trading on private information isn't the scandal, it's the mechanism. Markets produce better forecasts than audits precisely because they make it profitable to reveal what you know. The proposal would have Congress explicitly authorize this for government contracts rather than pretend the dynamic doesn't exist.

The competitive angle for prediction market platforms is real. Government contract fraud would be an entirely new market category with a built-in funding mechanism through congressional appropriation and a user base that extends well beyond retail bettors into investigative journalists, forensic accountants, and institutional compliance teams. Whichever platform moves first to build the infrastructure for contract-linked fraud instruments gets a first-mover advantage in a category that doesn't exist yet.

The proposal also fills a specific gap in the existing whistleblower framework. The False Claims Act already lets insiders file suits for 15 to 30 percent of recovered funds, but potential whistleblowers operate in the dark, unsure whether their suspicions are shared or whether a case is worth the personal risk. Persistently high fraud probabilities on a prediction market change that calculus. If a contract is trading at 60 cents, implying a 60 percent chance of proven fraud, that's a public signal that others see what you see, and that the expected value of blowing the whistle just went up. Congressional overseers and the press get the same signal, creating political pressure to investigate flagged contracts rather than waiting for a slow-moving audit cycle to catch up.

The prediction markets industry has spent two years proving it's more than a gambling curiosity. Combined weekly volume just crossed $6 billion. ICE is packaging Polymarket data for institutional desks. Robinhood, DraftKings, and FanDuel are all building prediction market products. But the use cases have been mostly recreational: Super Bowl, Bitcoin, Fed rates. Government fraud detection would be the first application where prediction markets aren't just aggregating opinion for entertainment but performing a public function the existing bureaucratic infrastructure demonstrably cannot. That's a different kind of legitimacy than getting your data on a Bloomberg terminal.

POLYMARKET OPENED A FREE GROCERY STORE. IT'S NOT ABOUT THE GROCERIES. 🥗

Polymarket opened a free grocery store in Manhattan's West Village yesterday, drawing 400+ New Yorkers who lined up hours before the 2 p.m. opening for no-cost produce, toiletries, and non-perishables. The pop-up runs daily through Monday, and the company donated $1 million to the Food Bank for NYC alongside the launch. It's a direct shot at Mayor Zohran Mamdani's government-run grocery store proposal, and Mamdani seemed to know it, posting on X with a sardonic headline: "Heartbreaking: The worst person you know just made a great point."

Kalshi ran a similar play earlier this month with a $50 grocery giveaway in the East Village. Two prediction market platforms under active regulatory pressure in New York, both handing out free food to locals. Hard to read that as anything other than a coordinated charm offensive.

The goodwill push comes at a pointed moment. NY Attorney General Letitia James recently warned that prediction markets could violate state gambling laws, and Assemblymember Clyde Vanel has a bill that would classify event contracts as unlicensed gambling with fines up to $1 million per day. Separately, an IDF reservist and civilian were just indicted in Israel for allegedly using classified military intelligence to bet on Polymarket, not exactly the headline you want when you're trying to stay legal in the country's biggest state.

"If it is [a publicity stunt] then I got some free food coming out of here… This is exactly what a food bank does," said Tori Hall, a 58-year-old Forest Hills paralegal who arrived at 6 a.m. With NYC grocery prices up 65.8% over the past decade and 1 in 9 state households facing food insecurity, the gesture lands regardless of motive.

The strategy is straightforward: build public goodwill before regulators build a case. Polymarket and Kalshi are spending marketing dollars in the country's largest media market to shift the narrative from "unregulated gambling platform" to "company that feeds New Yorkers." Whether Albany buys it is another question, but prediction markets are now fighting for public opinion on street corners, not just in courtrooms and CFTC comment letters.

MARKET MOVES 📈

📈 Biggest swing: “Will turnout in the Bangladesh parliamentary election be below 65%?” moved 6% → 91% (Polymarket)

💰 Top earner: @0x492442EaB586F242B53bDa933fD5dE859c8A3782-1766317541188 - $132,589 24H Profit (Polymarket)

🤔 Weirdest market: “Karoline Leavitt out by March 31?” (Polymarket)

ODDS & ENDS 📊

• Kalshi crosses $40B in all-time notional volume.

• MLB explores prediction markets partnerships.

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