Businesses Are Turning to Prediction Markets to Hedge Real-World Risks
Updated September 2, 2026
Updated September 2, 2026
We recently wrote about travelers hedging against cancelled flights.
Now, small businesses are experimenting with Kalshi contracts to protect against weather, regulation and other real-world risks.
Prediction markets are best known for elections, sports and other future events. But some businesses are starting to use them in a very different way: to protect themselves from risks they already face.
Reuters recently reported on several U.S. companies experimenting with this approach. In some cases, the businesses actually hope their prediction-market trades lose. If the unwanted event happens, however, the contract can pay out and help offset the financial damage.
The Houston Chronicle reported in August that the company made a $25,000 weather trade on Kalshi based on whether Houston would reach 103°F during the month.
The unusual part was that Discrete hoped the trade would lose.
The position was designed to protect the business from the financial impact of extreme heat. If Houston did reach the set temperature, the Kalshi contract would pay out and help offset some of the losses connected to the weather.
The Houston Chronicle described it as the first weather-based block trade of its kind on Kalshi. The deal was brokered by Greenlight Commodities.
That makes the trade very different from someone simply betting on tomorrow’s temperature. Discrete already faced a real business risk and used a prediction market to reduce some of that exposure.
The same idea is now being tested on a much smaller scale too.
Inc. reported in July that brothers Jason and James Jiang, who run the shop, had started trading weather contracts on Kalshi. Jason Jiang said the shop loses around 20% of its business when temperatures fall below 70°F.
The brothers were putting around $20 a day into the strategy, according to Inc., and had used winning weather trades to help offset weaker sales during colder periods.
The logic is simple. Cold weather may mean fewer customers and lower sales, but it can also increase the value of the prediction-market position.
If the weather stays warm, the contracts may lose money, but the shop could benefit from stronger sales instead. If temperatures fall and business slows down, the contracts can help make up part of the difference.
Waterhouse VC later highlighted the same example, reporting that the shop had made as much as $1,500 per month from its Kalshi weather positions.
In other words, the owners are trying to create a position that performs well when their normal business does not.
That is the basic idea behind hedging, and companies are starting to test it with risks beyond the weather.
Reuters recently highlighted Western Grazers, a California company that uses goats to clear vegetation and reduce wildfire risk.
The company faced a major increase in labor costs after a wage exemption affecting its goat herders expired.
According to Reuters, a contract was created that could pay Western Grazers $500,000 depending on what California lawmakers did next. The company paid for that protection because a change in the rules could have a major financial impact on its business.
The case shows how prediction markets could be used for risks that traditional insurance may not easily cover.
Businesses are also experimenting with prediction markets as part of customer promotions.
Reuters reported that companies including seafood business Get Maine Lobster and skincare brand Jaxon Lane have explored promotions where customer rewards depend on a real-world event. Prediction-market contracts can then be used to reduce the company's financial risk if the promotion pays out.
Imagine a company promising customers a refund if a certain team wins a major sporting event. That promotion could attract plenty of attention, but it also creates a potentially expensive problem if the team actually wins.
The company could buy contracts tied to the same result. If it suddenly has to refund a large number of customers, the market payout could help cover some of the cost.
Different businesses may be exposed to very different events, but the idea remains the same: find something that could cost the company money and take a position that may pay if it happens.
The idea is starting to become more organized. Fortune reported in August on Blanket, a tool designed to help small businesses find Kalshi markets linked to risks such as weather, tariffs, freight and regulation.
That could make prediction-market hedging easier to use. Instead of searching through markets manually, a business can look for contracts that move in the opposite direction of a risk it already faces.
There are limits, however.
Prediction markets are not the same as insurance. Insurance normally pays because a customer suffered a specific loss, while a prediction-market contract pays because a defined event happened.
That means the two do not always match perfectly. An ice cream shop could have a bad sales day without the temperature falling far enough for its weather contract to pay. The reverse could also happen.
A useful market also needs to exist, have clear rules and enough trading activity.
Still, the examples from Discrete, 28 Wishes and Western Grazers show why businesses are paying attention. Prediction markets are already being used for more than simply forecasting what happens next.
For some companies, they are starting to become a way to protect against what happens next.
