In mid-July, Kalshi received approval from regulators to list a new type of event contract that would let anyone wager on flight cancellations. The plan, however, was promptly blasted by social media users who warned that troublemakers could seek to force an airport shutdown in order to make their bet pay off. In response, Kalshi said it was putting the controversial airport contracts on ice. But on Tuesday, the company said it is now going forward—sort of.
According to Kalshi, it is listing a contract that lets users wager on whether more than 50% of flights into New York’s John F. Kennedy airport will be cancelled on October 22 and 23. As is the case with all prediction market contracts, the odds will shift over time based on betting patterns, and will pay out on a simple Yes/No basis.
A Kalshi spokesperson said the contract will only be available to the company’s 1000 or so institutional users, which will presumably reduce the risk a bad actor will seek to profit from the contract. The spokesperson also pointed out that there are a series of “excluded events”—including bomb threats, cyberattacks and laser incidents—that would result in Kalshi refunding bets.
The new flight cancellation contract—applying as it does to two days at a single airport—is far smaller in scope than what many people envisioned when Kalshi first won regulatory approval to offer such wagers. The reason for this is that the company created the contract in response to a request from a firm that is hosting a conference in New York on those dates.
Kalshi created the contract with the help of the market maker Susquehanna, which agreed to take the other side of the bet, and pay out $3 million in the event more than 50% of JFK flights are cancelled on the days in question. The firm hosting the conference, NEXTPredict, paid $12,000 in order to create the contract.
This means the opening odds for the bet are around 249-to-1 that most of the flights will be cancelled. Those odds, though, will change over time in response to factors like weather pattern and as more bettors take positions.
The upshot is that the JFK flight cancellation bet is essentially a new twist on insurance contracts that conference organizers and others have used to hedge against large scale cancellations.
“No matter how much you plan and minimize the risk associated with an event, outside forces like weather and geopolitical events can derail even the best events,” said Pierre Lindh, co-founder and managing director of NEXTPredict. “Kalshi’s new flight cancellation market allows our company to provide a certain level of financial stability should certain events transpire.”
It’s worth noting that the conference in question is for those interested in the prediction markets industry—raising the question of whether the JFK airport contract is the sort of thing other companies will replicate, or in large part a marketing effort.
According to the Kalshi spokesperson, it is the former, and that the platform is in talks with other companies in a variety of industries, including freight and energy markets, to create similar contracts related to flight cancellations at specific airports.