The rising popularity of combo contracts, which stack multiple event predictions into a single bet that only pays out if all legs win, is driving significant increases in reported trading volumes on major prediction markets. Last month, these multi-leg instruments accounted for more than 50% of notional volume on Kalshi, largely fueled by the start of the NFL season, while they now represent nearly 50% of daily volume on Polymarket U.S. following its domestic launch in May. Although combos dominate headline volume figures, they constitute less than 13% of total transactions on Kalshi, indicating that most speculators still execute trades via single contracts.
This disparity arises from how the Commodity Futures Trading Commission requires exchanges to report volume. Prediction markets measure every trade as $1 of notional volume regardless of the cash amount placed, whereas traditional sportsbooks report the total dollar amount wagered. Consequently, a trader placing pennies on a high-payout combo can generate thousands of dollars in reported volume due to market makers taking the other side. A CNBC analysis showed that while the average cash per single contract on Kalshi was under 47 cents, it dropped to about 9 cents for combos. This reporting structure has led some investors to mistakenly compare prediction market notional volume directly with sportsbook handle, potentially overstating the sector's scale relative to traditional betting platforms like FanDuel and DraftKings.
The divergence between notional volume and actual cash flow highlights a critical structural nuance in how prediction markets are measured compared to traditional financial or gambling venues. Because CFTC reporting standards treat both sides of a binary option as $1 in volume, the inclusion of low-cost, high-leverage combo contracts artificially inflates headline growth metrics without corresponding increases in real capital deployment. This creates a misleading perception of market depth and liquidity, particularly when analysts attempt to benchmark these platforms against sportsbooks where 'handle' reflects true wagered dollars. The fact that combos drive over half of Kalshi’s volume but less than one-fifth of its transaction count suggests that reported growth may be driven by speculative instrument design rather than broad-based user adoption.
For institutional observers and regulators, the reliance on taker volume as a more accurate metric of underlying activity offers a clearer picture of genuine demand versus market-making mechanics. While Kalshi maintains that its notional volume does not overstate activity, the potential for investor confusion remains high given the stark differences in reporting methodologies across asset classes. As prediction markets continue to expand their regulatory footprint and compete with established sports betting operators, distinguishing between gross notional exposure and net economic risk will be essential for assessing the sector's true market structure and operational sustainability.
