Front Running: Where Do Market-Makers Want To Trade?

Welcome to Front Running, the prediction markets newsletter from Eilers & Krejcik Gaming.

The following data and insight comes from our new Predictions Markets Intelligence vertical. For subscription options and sample reports, contact Simon Krejcik at skrejcik@ekgamingllc.com.

1. WHERE DO MARKET-MAKERS WANT TO TRADE?

• For our latest Prediction Market Monitor, we surveyed a handful of market-makers to get an early indication of their favored places to trade.

• The short answer is: “where the recs are.”

• At present that’s overwhelmingly Kalshi, which, as shown above, holds 79% share of U.S. sports Contract Volume, and is broadly welcoming of market makers.

• Polymarket U.S. has the best rebates for MMs and liquidity incentives on certain markets, but the platform is not as easy to interact with, per one market-making source.

• As for the newer exchanges, DKeX has a “very impressive team” per checks and is very open to onboarding new MMs. But that’s not the case everywhere.

• Some exchanges are turning down new MM partners, saying they have sufficient liquidity. Other exchanges, meanwhile, have reportedly set MM fees to uneconomic levels.

• Are these methods designed to keep external MMs out and capture order flow for internal teams? Multiple operators told us they believe that would be breaking CFTC regulations—but will it be enforced?

• It’s a hugely important question. How much competition there is in market-making will have massive impact on the economics of PMs going forward.

2. NEWS YOU MAY HAVE MISSED: POLYMARKET EYEING USER-GENERATED MARKETS?

• Polymarket U.S. has filed a U.S. trademark application for “CREATE YOUR OWN MARKET,” potentially signaling plans to let users create their own prediction markets and questions.

• The filing is still pending and awaiting examination by the USPTO, meaning it provides an early indication of product direction rather than any forthcoming launch.

• Polymarket U.S. users can currently suggest markets for creation via Discord but not create their own.

• Over on Polymarket’s international exchange, user-generated sports combos—which launched at the end of May—generated <1% of total sports Contract Volume in June, per our tracking.

3. QUOTE OF THE WEEK: DRAFTKINGS SURPRISED BY LEVEL OF MARKET-MAKER INTEREST

• DraftKings Predictions GM Jeanine Hightower Sellitto said the above on EKG’s Zero Latency podcast last week.

• She added that capital constraints meant market-makers had to choose a select number of exchanges to deploy their capital and DraftKings was a clear front-runner thanks to its high number of customers and potential recreational flow.

• In turn, more MMs and better pricing/liquidity should create a virtuous circle of liquidity that will attract more customers.

• As noted in Section 1, DraftKings has earned plaudits from MMs for its willingness to onboard new partners, though some early users criticized the platform for looking too much like a sportsbook.