DraftKings co-founder Matt Kalish heavily criticized Kalshi in a series of social media posts on X. In his tirade, he dismissed the prediction market platform as a niche product and doubted whether it would ever compete with major sportsbooks.
Kalish left DraftKings earlier this year after co-founding the company along with CEO Jason Robins and President Paul Liberman.
“I’m retired from operating in gambling, just posting content because I know ball and can say s*** way more clearly than ppl have been willing to do,” he stated in a thread on X.
Casual Users Decimated on Kalshi
One criticism Kalish leveled at the operator was the company’s heavy investment in marketing to attract casual users that he claims then “get decimated by market-makers and pro gamblers, losing 97% in sports markets.”
DraftKings has faced similar claims that it exploits gamblers, targeting them with marketing and VIP hosts. It is currently dealing with multiple lawsuits.
The company and rival sportsbook FanDuel have also spoken openly about their desire to use prediction markets as enhanced trading opportunities, acting as market makers.
Kalish admitted that he realizes “to some I’m the wrong messenger for this.” But wanted to make clear that he sees Kalshi as a niche product appealing only to the select few who are making money trading on the exchange.
A survey earlier this year found that most bettors prefer DraftKings Sportsbook over Kalshi in states that offer both legal sports betting and prediction markets. Kalshi was preferred to FanDuel, however, and has rapidly grown in popularity since expanding into sports markets.
Prediction Markets Offer Limited Experience
Kalish said that Kalshi’s product is still a long way from offering the same experience as a highly calibrated sportsbook app.
“Everyone everywhere needs to chill the f*** out,” Kalish stated. “The products or experiences that finally gets anywhere close to a reasonable sports betting experience will be developed over time. For now let’s just keep it a buck, the only people who are hyping these are those making money from it TODAY or scared they made a dumb investment and rationalizing.”
Kalish claimed that normal people have no clue about the micro mechanics of prediction markets and find the experience of using them confusing. This leads to professionals exploiting those casual users to generate profits.
A user replied citing the UK example of Betfair, which has been compared to the rise of prediction markets in the US. But even Betfair failed to penetrate the casual market, which “wants a fixed price and a big green button, not a limit order book.”
Kalish admitted to using Kalshi but highlighted its limitations, including hidden fees and the lack of bonuses and rewards offered by sportsbooks.
“For our customers that are in sportsbook jurisdictions, they prefer to still do business with a sportsbook. We’ve done a lot of surveys. We know that we are able to give them promotions and offers, and it’s a more engaging experience overall,” said fellow co-founder Liberman recently.
Limited Liquidity Limits Trading Opportunities
One advantage of prediction markets is the ability to trade out and profit as odds shift. However, Kalish said that limited liquidity often makes this impossible.
He posted some personal examples of when he has been unable to trade out for profit, including one on Brooks Koepka to win the PGA Championship. Koepka started the tournament strongly, and his odds at a sportsbook would have fallen from the pre-tournament price. But a lack of market liquidity meant Kalish could only trade out at a fraction of the original price.
The danger is that many companies launching their own platforms will keep liquidity limited as users divide their money across multiple operators. This is not a problem at sportsbooks, as the house generally accepts wagers, although it does not always offer the chance to trade out.
Sportsbooks Also Limit Winning Bettors
Others on X were quick to point out that sportsbooks often limit winning customers, however. Users who engage in arbitrage trading – guaranteeing profit by wagering on all possible outcomes – will quickly find their account is limited.
Kalish responded to this criticism by saying DraftKings continues to expose itself to greater risk than market makers on prediction markets.
“The amount risk management will (wall) street market makers do in an exchange is massive. MM (market-makerts) have infinite cash to invest but choose to only make a few billion a month available as exchange liquidity which is why s*** is razor thin and you get 60% breakage on 1000 dollars. Meanwhile DK/FD (DraftKings/FanDuel) booked 2.5 trillion of risk last year each (approx) its order of magnitudes more limiting (factors of several hundred times more liquidity in a top sportsbook vs entire exchange market),” Kalish stated.
That does not quite address the issue of winning users being limited at sports betting sites. Some states have moved to crack down on this practice, with Massachusetts now requiring companies to inform bettors who are subject to limits.
As Kalish said, he has now left the sports betting business. He is now leading a content creator agency. His thread on X has attracted over 200,000 views.
He ended his attacks on Kalshi by stating, “Please god everyone put your megaphones the f*** away and build a real mainstream appeal product and until then shut the f*** up you are niche. Thank you.”
