Chicago, Illinois – The burgeoning landscape of online prediction markets, platforms where users wager on the outcomes of future events, is currently experiencing a dramatic surge in activity, largely propelled by the increasing popularity of "combo contracts." These multi-leg bets, akin to parlays in traditional sportsbooks, are driving unprecedented notional volumes on leading platforms such as Kalshi and Polymarket. However, this impressive growth in reported figures has ignited a critical debate among industry observers, analysts, and regulators regarding whether these metrics accurately reflect the true underlying cash flow and genuine market engagement. The discussion centers on the specific methodologies mandated by federal regulators for reporting trading volume, which some argue can create a perception of rapid expansion that may not align with the actual capital being transacted.
The Explosive Growth of Combo Contracts: A New Paradigm for Prediction
Combo contracts, which require all constituent predictions to be correct for a payout, have become a cornerstone of the recent growth in prediction market engagement. Their appeal lies in the potential for significant returns from relatively small initial outlays, mirroring the high-risk, high-reward allure of sports parlays. This similarity has proven particularly potent in attracting users, especially those with an interest in sports wagering.
The impact of these bundled bets is quantifiable and striking. Last month, combo contracts were responsible for over 50% of the notional volume traded on Kalshi, a regulated prediction market that allows trading on a wide array of event outcomes. This surge was notably catalyzed by the commencement of the NFL season in September 2026, highlighting the strong correlation between major sporting events and the adoption of these complex contracts. The data indicates that sports-related combinations overwhelmingly dominate the composition of these combos, underscoring a significant crossover appeal from traditional sports betting demographics.
Similarly, rival platform Polymarket has seen an analogous trend. Following the official launch of its U.S. exchange in May 2026, Polymarket prioritized the integration and promotion of combo contracts. This strategic focus quickly bore fruit, with combos now accounting for nearly 50% of Polymarket U.S.’s daily volume. This robust growth, also significantly bolstered by the ongoing NFL season, demonstrates a clear market demand for these aggregated wagering opportunities across the competitive landscape. The rapid assimilation of these products into the core offerings of both platforms signals a pivotal shift in how prediction markets are structuring their engagement models, moving beyond simple binary outcomes to more intricate, higher-payout scenarios.
Understanding Notional Volume: A Regulatory Imperative
Despite their substantial contribution to reported volume, combo contracts represent a nuanced challenge in accurately assessing market activity. The disparity arises from the specific reporting requirements imposed by the Commodity Futures Trading Commission (CFTC), the federal regulator tasked with overseeing prediction markets in the United States. Under CFTC guidelines, exchanges are mandated to report volume in a particular manner that can lead to inflated notional figures, especially concerning multi-leg contracts.
In prediction markets, every event contract typically has a binary outcome, settling at either $0 or $1. When a trader places a wager, regardless of the actual cash amount they commit, the platforms measure it in terms of "notional volume." For a single contract, this means that for every dollar a speculator pays to place a trade, someone on the other side of that order effectively takes on a corresponding exposure, contributing to a total of $1 in notional volume. This fundamental mechanism ensures that for every "yes" bet, there’s a corresponding "no" bet, each contributing to the reported volume.
The mechanics of combo contracts, however, introduce a multiplier effect. Because combos can offer payouts far exceeding the typical $1 settlement of a single contract, a speculator can commit a minimal amount of cash – sometimes mere pennies – to initiate a trade with a potential payout that could run into hundreds or even thousands of dollars. The crucial factor here is the role of "market makers," entities that provide liquidity by taking the opposite side of these high-payout trades. When a market maker assumes the risk associated with a potential multi-thousand-dollar payout from a low-cost combo, the notional volume reported reflects this much larger potential exposure, rather than the minuscule cash sum initially wagered by the speculator.
Chris Park, a researcher and founder of MSR Decode, a firm specializing in prediction market data analysis, articulated this discrepancy, stating that these multi-leg contracts are "helping [Polymarket and Kalshi] claim a higher number with lower realistic cash output." This observation highlights the core of the debate: while the reported notional volume may appear impressive, the actual capital flowing through the system could be significantly less, leading to a potentially skewed perception of market scale and liquidity.
Statistical Deep Dive: Cash vs. Volume vs. Transactions
To illustrate this divergence between reported volume and actual financial activity, a CNBC analysis of trades on Kalshi conducted on September 27, 2026, offered compelling insights. The findings revealed that for single contracts, the average amount of cash placed per trade was less than 47 cents. In stark contrast, for combo contracts, the average cash commitment per contract plummeted to approximately 9 cents. This data unequivocally demonstrates that while combos are driving substantial notional volume, they are doing so with a disproportionately smaller amount of actual capital per underlying contract.
Further corroborating this trend, data sourced from Dune, a blockchain analytics platform, revealed that in September, while combo contracts constituted a dominant 58% of Kalshi’s overall trading volume, they accounted for less than 13% of the total number of transactions executed on the platform. This statistical disconnect is crucial: it indicates that a relatively small number of highly leveraged combo transactions are generating the bulk of the reported notional volume, rather than a broad base of individual trades.
The influence of combo contracts extends beyond sports-related markets. On Kalshi, these aggregated bets trump other categories in terms of notional volume, commanding over 35% of the total volume share across all offerings. This suggests that the structural advantage of combos in generating high notional figures is not confined to a single market segment but is a pervasive phenomenon across the platforms. The lack of transparent, easily accessible public information detailing how these combos are precisely measured and factored into headline volume numbers further complicates the picture, making it challenging for external observers to discern the true growth trajectory of these platforms.
Investor Perception: An "Apples and Oranges" Conundrum
The intricate reporting mechanisms for prediction market volumes have broader implications, particularly for investors attempting to benchmark the growth of these nascent platforms against established industries. The rising popularity of prediction markets, especially their sports-related event contracts, has already been linked to a downturn in the fortunes of traditional online sportsbooks. Major players like FanDuel parent Flutter Entertainment and DraftKings have seen their stock prices plunge by 70% and 45% respectively over the past year, with some attributing this decline to the competitive pressure from prediction markets.
However, analysts caution that investors may be making an "apples and oranges" comparison, conflating different metrics that are not directly comparable. Ian Moore, an analyst at Bernstein, highlighted this potential pitfall: "I have spoken to investors who see the notional number and compare it to [the] handle in sports betting, and then make the argument that, you know, these prediction markets have already exceeded [the] scale of sports betting."
The fundamental difference lies in how "handle" is defined in sports betting versus "notional volume" in prediction markets. In sportsbooks, the "handle" represents the total dollar amount of all wagers placed by customers. In contrast, prediction markets, under CFTC reporting, count both sides of a trade, and more significantly, account for the potential maximum payout of a contract, rather than just the initial wager.
Rich Jaycobs, an independent advisor to prediction markets navigating the complex regulatory approval process with the CFTC, elaborated on this critical distinction. He explained that "When a client buys a deep out-of-the-money contract or a combo, prediction markets may have dollar volumes anywhere between 20 to 100 times greater than sportsbooks because CFTC reporting requires one thing and sportsbooks report the same activity differently." Jaycobs underscored the resultant confusion, noting, "Same basic bet, same basic idea, but you’re getting a completely different perception of activity." This divergence in reporting creates a significant challenge for investors seeking to make informed decisions based on market scale and competitive positioning.
Industry Responses and the Quest for Alternative Metrics
In response to the growing scrutiny, prediction market platforms have offered varying perspectives on their volume reporting. Jack Such, a spokesperson for Kalshi, defended the current methodology, asserting that its notional volume reporting does not overstate activity. He indicated that if market participants or observers are more interested in alternative measurements, such metrics are available for examination, implying that the platforms provide the data, and it is up to the users to interpret it.
While notional volume remains the standard metric for prediction markets, a consensus is emerging among some industry players regarding the utility of alternative measurements for a more granular understanding of market dynamics. One such proposed metric is "taker volume." This measurement focuses on the activity of "takers," who are participants that actively remove liquidity from the market by accepting existing offers, as opposed to "market makers," who provide liquidity by placing bids and offers. The argument is that taker volume can serve as a more accurate barometer of genuine market demand and speculative interest.
Polymarket, for instance, aligns with this perspective. Kyle Gesuelli, the company’s head of revenue and analytics, stated, "We really like to look at taker volume in terms of buying yes on combos." He clarified that this specifically measures the demand from traders who are betting that all combined outcomes within a combo contract will indeed come true. For Gesuelli, this approach "feels like a better measure for us to just truly understand the underlying activity," suggesting a recognition within the industry that headline notional volume alone may not fully capture the essence of market engagement.
Regulatory Scrutiny and the Future Outlook
The debate over volume reporting takes place against a backdrop of increasing regulatory attention. The CFTC, as the primary federal regulator, has been actively engaged in overseeing the nascent prediction market industry, as evidenced by a committee meeting on August 20, 2026, specifically convened to address prediction market risks. The potential for inflated volume figures to misrepresent market health could attract further regulatory scrutiny, potentially leading to demands for greater transparency or even revised reporting standards to ensure investor protection and market integrity.
The entry of sophisticated players, such as hedge funds, which were reportedly poised to significantly jump into prediction markets by August 19, 2026, further amplifies the need for clear and accurate metrics. These institutional investors rely heavily on precise data for their trading strategies and risk assessments, and any ambiguity in volume reporting could impact their confidence and participation. Moreover, the emergence of advanced trading methods, including the use of AI bots and antennas by full-time traders (reported on August 1, 2026), suggests a maturing market where data integrity is paramount.
The implications of the notional volume debate are multifaceted. For the prediction market platforms themselves, the challenge lies in balancing regulatory compliance with presenting an attractive growth narrative to potential investors and users. For traditional sportsbooks, a clearer understanding of prediction market activity could refine their competitive strategies and investor communications. Most importantly, for individual traders and the broader financial community, clarity on volume metrics is essential for making informed decisions and fostering trust in these innovative yet complex financial instruments.
A Maturing Market at a Crossroads
The current surge in prediction market activity, spearheaded by the popularity of combo contracts, marks a significant milestone in the evolution of these platforms. While the headline notional volume figures paint a picture of explosive growth, the underlying complexities of regulatory reporting and the substantial difference between reported volume and actual cash flow present a critical juncture for the industry. The ongoing discussion about appropriate metrics, the call for greater transparency, and the potential for regulatory intervention underscore the challenges inherent in introducing novel financial products into a regulated environment. As prediction markets continue to gain traction and integrate further into the broader financial landscape, the resolution of this volume debate will be crucial for their long-term credibility, investor confidence, and sustainable growth. The industry is at a crossroads, needing to clearly define what constitutes true market activity to ensure a robust and trustworthy future.
Disclosure: CNBC and Kalshi have a commercial relationship that includes customer acquisition and a minority investment.
