Small businesses roll the dice on Kalshi to manage their risks

Brenden Theaters typically sees a surge in sales during the summer, before business at the regional movie chain drops off sharply in the fall. This year, it's trying a new strategy to even out revenue: using a prediction market. 

The Las Vegas, Nevada-based company, which has seven locations across four states, is joining the growing number of small businesses using Kalshi to hedge financial risk. Robert Lytle, the chief operating officer for Brenden, said the theater chain requested a new market on the prediction market that lets people wager on the number of films studios release each quarter.

If fewer than 60 movies are released, the company is paid under the Kalshi contract. If the slate comes in higher, Brenden loses money on its Kalshi bet, but then can expect to offset the loss as higher ticket sales drive revenue growth.

"It's almost an insurance policy, if you will," Lytle told CBS News.

Since Kalshi launched its prediction market in 2021, the New York company has enabled users to bet on the outcome of sports, elections, weather, government policy, celebrity news and many other events. Now, Kalshi is also inviting small businesses to use the "event contracts" traded on its platform to protect themselves against financial risk.

According to Nicolas Hull, director of business development at Kalshi, more than 200 businesses used the platform last month for hedging, and the company is eager to grow the segment. Kalshi is seeing particular interest from small businesses in using the prediction market to offset risks related to weather and gas prices, he said. 

Those businesses include a Los Angeles ice cream shop that hedges on climate markets by betting on when the temperature will drop below certain levels. If they're right, they get a payout from Kalshi, making up for the slowdown in foot traffic that comes with colder weather. In another example, a New York City bar took advantage of hedging opportunities during the NBA Finals to help pull off a promotion.

Kalshi spokesperson Laura Frank added that some businesses are hedging on their own, while others reached out to Kalshi, as Lytle did for information on how to get started.

Kalshi recently announced it would partner with the U.S. Hispanic Chamber of Commerce to offer the prediction market's "risk management tools" to more than 5 million small businesses.

A real hedge?

In financial markets, investors use derivatives such as options, futures or swaps to protect themselves against potential losses. 

For example, airlines commonly use such instruments to hedge against rising oil and jet fuel prices. Similarly, an investor might buy a "put" option — a contract that allows them to sell an asset at a specified price within a specified period — on a bond or other investment. 

For businesses hedging on Kalshi, "You essentially are trading on the outcome that you don't want to happen," Hull said. 

Ian Appel, an associate professor at the University of Virginia's Darden School of Business who specializes in finance, agrees that prediction market bets can function like a hedge in financial markets.

"I would certainly consider it a hedge in the traditional sense," he told CBS News, adding that the practice aligns with the purpose of hedging, which is to reduce the riskiness of a company's cash flow by creating a more predictable revenue stream.

He pointed to other examples of businesses that have hedged using prediction markets, including bar owners who have offered promotions during major sporting events and made trades intended to offset losses.

"There are risks that you would like to hedge as a business owner, which you can't, and potentially, prediction markets help to fill that gap," Appel told CBS News.

Other experts are less convinced of the value of prediction markets in hedging against potential business losses.

"The problem is that Kalshi derives most of its revenue from event contracts on sporting events, and those event contracts are not used as a hedge against some economic risk," Benjamin Schiffrin, director of securities policy at Better Markets, a nonpartisan organization focused on financial reform, said in an email. "And a sports bar that offers a discount if the home team wins a big game, and then bets on that team to win on Kalshi, is not all of a sudden trading a financial derivative."

Schiffrin also notes that hedging remains a sideline for Kalshi and that its main business is drawing customers to gamble on myriad events. And typically, such bets lose money. 

According to research earlier this year from Citizens, the median return for a prediction market user from July 2025 to March 2026 was -8%, meaning they would lose $8 for every $100 spent. By comparison, the median return for sports bettors in the legal U.S. market is -5%, the financial firm found.

Prediction markets are also facing off against a number of U.S. states pushing to sanction them for allegedly violating state gambling laws. Kalshi maintains that its products differ from those offered by state-regulated sportsbooks and casinos and that it is subject to federal rules. The Commodity Futures Trading Commission, the federal agency that oversees prediction markets, has sought to block states from restricting them. 

For his part, Lytle seems unfazed and, well, ready to roll the dice on using prediction markets to protect his company from business risks. He told CBS News he allocated $1,000 of Brenden's budget to trade on Kalshi in its latest quarter. And although the outcome of the company's bets won't be known until January, he said he is happy to experiment.

"We're kind of in that move fast, break things phase," Lytle said. "The theater industry, we're really slow at adoption and really slow at innovation. We're trying to be a company that's kind of on the forefront of a lot of these things now."