Editor’s Note: We’re back. Thanks for your patience with this series. I ran into some personal problems that led me away from recording for a bit. It was a difficult episode, but I’m excited to get the gears rolling again. We didn’t dive too hard into the op-ed during the conversation, but you should still find both exciting. The prediction markets op-ed from our guest, Andy Lee, is timely, as the NFL and many major institutions are calling for regulators to act, and it shows how this goes beyond simple win/loss sports betting. The podcast follows some free-flowing conversations on RWAs and tokenization, plus a look back at what the hell happened with crypto gaming through years and if there is a chance for a comeback.
Thanks - Comrade Quile
How savvy prediction market users profited off the World Cup without betting on an outcome
By: Andy Lee, Partner at Hashkey RWA
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Since Spain lifted the World Cup trophy in July, the tournament has largely faded from public consciousness. But for prediction market bettors, the tournament left a lasting impression.
Kalshi and Polymarket combined for roughly $19 billion in notional trading volume over the course of the tournament — more than the entire U.S. legal sportsbook handle for June and July. In June alone, the platforms recorded $44.8 billion in combined monthly volume, a 75% surge from May. Interestingly, many prediction market participants never placed a bet on their favorite team—in fact, they never bet on a specific outcome at all. Instead, savvy traders were able to arbitrage various prediction markets platforms and design betting strategies that earned them money, regardless of whether a game ended in a win, lose, or draw.
The practice is similar to ETF arbitrage, in which crypto traders take advantage of the price discrepancies between spot, futures and net-asset value (NAV). Traders, for instance, might notice a spot Bitcoin ETF trading at a discount to the value of Bitcoin. They then buy the ETF shares, short an equivalent amount of Bitcoin on the futures market, and pocket the difference when the two prices eventually converge. It doesn’t matter whether the price of Bitcoin goes up or down, the trader still takes a profit.
Prediction market traders ran the same play with World Cup contracts. Because platforms like Kalshi and Polymarket serve different user bases, the same match outcome often carried two different prices. A contract paying $1 if Spain won its quarterfinal might cost 62 cents on one platform and 58 cents on the other. A trader could pick Spain to win on the cheaper venue and pick them to lose on the other, spending less than a dollar to guarantee a dollar back. It doesn’t matter whether Spain wins the game, one of the two contracts will pay out either way, and the trader can pocket the difference.
In prediction markets, arbitrage wasn’t reserved for the savviest institutional investors like we see in ETF markets. Throughout the tournament, everyday retail investors capitalized on pricing inefficiencies across venues, looking at odds spread across different markets, sportsbooks and exchanges. Each had different dynamics, making it possible to quickly capitalize on probability mismatches and create the same kind of spread-based opportunity that brought liquidity into ETF arbitrage.
Every World Cup match created a globally traded probability, repriced in real time by millions of participants who were evaluating team strength, tracing each team’s tournament path, weighing injuries, and benchmarking market sentiment. The divergences were real and observable: ahead of the U.S. round-of-16 match against Belgium, for instance, the same outcome — a U.S. tournament win — was priced at 4.3% on Kalshi and 3% on Polymarket.
Active prediction traders spent the summer acting less like sports gamblers and more like investors, capitalizing on mispriced contracts that diverged from underlying value. This unlocked a massive number of opportunities to buy underpriced contracts, hedge on another venue, and lock in an all but guaranteed profit. Even major institutional trading firms spent the tournament building dedicated desks to treat prediction markets like legitimate financial derivatives.
The spreads were typically wider than in traditional sports betting. Sportsbooks converge quickly because they share pricing feeds and hedge against each other. Prediction market venues, by contrast, serve largely distinct user bases with different frictions — KYC requirements on one side, crypto custody on the other — which led to sharp pricing discrepancies. The best opportunities hid in the least-watched fixtures of a 48-team, 104-match tournament: thin attention meant thin liquidity, which caused prices to drift apart
It’s important to highlight that arbitrageurs’ impact on prediction markets was largely positive. They helped to bring fragmented prices back into alignment, serving as a liquidity and price-discovery service. A retail bettor using either venue got a tighter, more accurate price because other traders were working the spread.
The World Cup is over, but the playbook it validated isn’t going anywhere. Prediction market arbitrage is highly profitable, and a large number of traders are taking notice.
Andy P. Lee is a Partner at HashKey RWA, the tokenization arm of HashKey Group, a leading end-to-end digital asset financial services firm in Asia. Through his work at HashKey RWA, Andy collaborates with global institutions to architect innovative asset tokenization solutions, guiding their strategic entry and expansion into the digital asset class. | LinkedIn |
Really interesting breakdown. The arbitrage angle is what caught my attention because it changes how I look at prediction markets.
Instead of asking only, “What outcome do I think will happen?” the better question can be, “Are two markets pricing the same underlying probability differently?”
That is a much more sophisticated framework. It turns the discussion toward liquidity, execution, market efficiency, and risk management rather than simply picking winners.
I’ll be watching how long these spreads remain meaningful as more institutional participants enter the space.
$44.8B in combined volume for June alone, up 75% from May, says a lot about how fast these venues are scaling. The ETF-style arb angle is the part I hadn't thought about.