Imagine running bars near Dodger Stadium and quietly hoping the home team loses. One LA hospitality group didn't exactly root against the Dodgers. It just made sure a playoff exit wouldn't hurt the bottom line.
The Hedge
Kalshi told Fortune that an unnamed hospitality group with 25 bars, including several near Dodger Stadium, traded $60,000 on its platform that the Dodgers would not advance to the World Series. Then the Dodgers lost the NLCS to the Milwaukee Brewers last week.
The position returned almost twice what the group put in. According to Fortune, that money helped make up for the revenue the bars would have brought in if the Dodgers had kept playing.
Think of it like this: the bars were already "betting" on the Dodgers through foot traffic. The Kalshi trade was the safety net.
https://twitter.com/kalshi_business/status/2112574723188261194
'Bespoke Insurance'
Columbia University law professor Joshua Mitts, who studies prediction markets, told Fortune the Dodgers trade "is functionally quite similar to a form of bespoke insurance."
"You could imagine that there are other risks that businesses face that if there were a market available which functions similarly to the insurance market, then those businesses might want to participate in that kind of a market," he said.
They're Not the Only Ones
Fortune lists several other businesses that have hedged on prediction markets:
- The Jeffrey, a New York City bar, promised to cover patrons' tabs up to $100 each if the Knicks won an NBA Finals game. The bar put $5,000 on Kalshi that they would, and the $13,500 payout covered the tabs with $8,500 left over.
- An unnamed insurance company placed five Kalshi trades that could pay out $3 million if LSU wins this season's national championship. That matches what the program would owe coach Lane Kiffin in bonuses.
- A Los Angeles ice cream shop reported making nearly half its monthly rent, up to $1,500, by betting on when cold fronts would hit town, hedging against slow days.
There's even an app for it. In August, financial economist Lauris Zminsky launched Blanket with Kalshi. It's an AI tool that suggests yes-or-no markets a business could use to offset a specific risk.
Why It Works
Prediction markets are booming. Fortune, citing Pew Research Center data, reports that trading volume on the platforms doubled between May and July, topping $58 billion on Kalshi and nearly $22 billion on Polymarket, mostly driven by sports.
Dartmouth economics professor Eric Zitzewitz told Fortune that sports hedges work well because "there's so much data, there's so much repetition." He noted you'll pay fees, "so you'll be paying something for the insurance you get from these markets—but you should be getting fair underlying prices."
The Catch
It's not risk-free. Mitts warned that these hedges work best for simple yes-or-no outcomes like weather or a game. A business betting on information could become a "systematic loser" if a competitor knows more.
There's also the lack of oversight. Unlike traditional insurers, prediction markets don't have the same guardrails against fraud and abuse. "This is a bit of a free-for-all," Mitts said.
Our Take
Betting against your hometown team sounds like a betrayal. For a business that depends on playoff crowds, it's just smart planning. The Brewers won the series, and an LA bar group still came out ahead.
Photo: Cody Williams / Wikimedia Commons (CC BY-SA 4.0)
