Kalshi Seeks To Let Traders Bet On Flight Cancellation Rates

Kalshi Inc. has filed to expand its prediction market that allows traders to bet on, or hedge against, disruptions and frustrations of air travel. The exchange already lets participants wager on contracts tied to the number of delays and cancellations at specific US airports like New York's John F. Kennedy International Airport and Chicago O'Hare International Airport.

The new product would be based on the percentage of scheduled flights canceled in a certain time period at a specific airport, according to the Tuesday filing with the US Commodity Futures Trading Commission. It would rely primarily on data from airline tracking service FlightAware, with the Bureau of Transportation Statistics serving as a backup source for settlement.

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"We certify markets all the time; this market isn't live. While this market has utility in hedging travel-related risk, we're still evaluating it," Kalshi said in an email statement.

The filing comes as use of prediction markets becomes more prevalent in several aspects of life. Founded in 2018, Kalshi allows users to buy and sell contracts tied to outcomes of real-world occurrences like political elections and sporting events. The business, which turns everyday inconveniences into tradeable events, is supervised and licensed by the CFTC.

Tarek Mansour, chief executive officer and co-founder of Kalshi, said last month at the Bloomberg Market Structure Conference that people in the Florida Keys were using the prediction market instead of purchasing hurricane insurance.

However, as the prediction market industry grows, so do worries about their integrity. Airlines for America, a group that represents the largest US carriers, said it has "serious concerns" with any market that would allow people to make a profit from flight cancellations.

"The safety and security of the aviation system should never be treated as a betting proposition," the group said in a statement. "These types of markets would create the wrong incentives and should not include outcomes involving the operation or safety of commercial air travel."

While there are arguments that these products could "marginally help" passengers hedge the cost of missed flights, it would be a "net negative" for the public and bettors, said Paul Hudson, president of passenger group FlyersRights.

"Insiders can both have an advantage in betting knowledge and could actually generate delays through manipulation or even more nefarious ways," Hudson said.

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Earlier this month, Spotify Technology SA asked Kalshi and Polymarket to clarify that neither company has a partnership with the streaming service after identifying users manipulating rankings tied to prediction market bets.

In April, France's forecasting office flagged suspected tampering with weather sensors at its largest airport after detecting unusual readings alongside heavy betting on Polymarket.