Waterhouse VC invests globally in publicly listed and private companies across the wagering and gaming ecosystem. The Fund is available to wholesale investors only.

Since inception (August 2019), Waterhouse VC has achieved a net total return of +2948% (63.5% p.a. annualised) as at 31st July 2026, assuming reinvestment of all distributions. Past performance is not a reliable indicator of future performance.

The Missing Hedge Layer

A Los Angeles ice-cream shop, 28 Wishes, says sales fall by about 20% when the temperature drops below 70°F. Since April, its owners have put about US$20 a day on Kalshi weather contracts and report profits of up to US$1,500 a month.

A payout can offset lost sales on a cold day, but the hedge is imperfect. The contract settles on the temperature at a selected weather station, not the shop’s actual sales. It could therefore pay when the shop remains busy or fail to pay when cold weather keeps customers away. This mismatch is called basis risk. To limit it, a business must choose a weather station, temperature threshold and time period that closely match the conditions affecting its revenue.

Prediction markets have made thousands of events tradeable, but a tradeable contract is not automatically a useful commercial hedge. For Waterhouse VC, the opportunity lies in firms that connect business exposures with suitable contracts and specialist capital.

*28 Wishes uses prediction markets to offset some of the revenue lost when temperatures fall. Source: 28 Wishes Ice Cream Shop.*

A Wider Risk Pool

Indemnity insurance pays against a covered loss. Parametric insurance can settle against an agreed trigger, but is still written for a customer with an insurable interest. Event-contract traders need not suffer any corresponding loss. A business hedging lost revenue can trade against weather forecasters, sports specialists, market makers and recreational traders. Their combined risk appetite can create liquidity for exposures that would otherwise require bespoke underwriting.

Exchanges provide the market infrastructure, but not the exposure analysis, structuring and distribution needed to turn contracts into business hedges. Where natural liquidity is thin, specialist capital providers must also price and hold the risk while managing correlated exposures across customers.

Kalshi advertises more than 8,000 live markets, while Reuters reported US$27 billion of trading on the platform during the 2026 World Cup. The commercial test is whether that infrastructure can support repeatable business hedging.

Turning Exposure into a Hedge

Consider a New York bar that expects to lose US$50,000 of profit if the Knicks miss the conference finals. At 20 cents, 62,500 "Knicks miss" contracts would cost US$12,500. If the Knicks are eliminated, the contracts pay US$62,500, producing a US$50,000 gain before fees. If the Knicks advance, the contracts expire worthless and the hedge costs US$12,500.

The position only works if the bar's US$50,000 figure is sound. The owner must judge how many home games are at risk and what each contributes, account for staffing and stock already committed, decide how much to cover and adjust as the series develops. Few publicans will manage that unaided as prices and exposure change. Some may use AI tools to analyse and adjust their exposure; others will seek advice from domain experts. In either case, regulated distributors can arrange compliant execution.

Supplying Capacity

Past volume can understate how much a business can hedge. In June, Susquehanna’s Jeremy Maletz said the firm could quote tens of millions of dollars of risk in a contract with only about US$100,000 of past trading. It could do so if the market’s price discovery and Susquehanna’s own checks gave it confidence in the price. Specialist market makers can therefore supply far more capacity than past turnover suggests.

That capacity must be managed across customers. Ten unrelated bars hedging the same Knicks result create one concentrated exposure for the provider. The same problem arises when businesses hedge the same storm, election or policy decision. A provider must aggregate positions, assess correlations, set limits and decide when to hedge or reduce exposure.

Capital is another constraint. A standalone Kalshi event-contract position is generally collateralised against its maximum possible loss. If a market maker buys 100 million “No” contracts at 99 cents when “Yes” is priced at one cent, it must commit US$99 million. If “No” wins, the contracts settle for US$100 million, generating a US$1 million profit before fees. If "Yes" wins, the market maker loses the US$99 million committed.

That capital remains tied up until settlement. A long-dated position can therefore lock up a substantial sum for a small potential return.

*The Lloyd’s Underwriting Room, a marketplace built around specialist risk selection and capital. Source: Lloyd’s.*

Settlement and Regulation

Commercial users also need confidence in settlement. In April 2026, abrupt temperature jumps at Paris Charles de Gaulle Airport settled profitable Polymarket positions. After examining the data and equipment, Météo-France filed a police complaint alleging interference with an automated data-processing system.

For a business, the settlement source, treatment of corrections, fallback data and dispute procedures all affect whether the hedge performs as expected. A July CFTC staff advisory reiterated that registered exchanges should identify settlement sources before listing contracts and assess their reliability, objectivity and resistance to manipulation.

Regulation will shape how these markets scale globally. The same hedge may be available in one jurisdiction and restricted in another. This creates a role for distributors that can navigate different regulatory regimes and arrange compliant access.

Waterhouse VC View

The most credible early commercial uses are short-dated, data-rich exposures with objective settlement sources and enough recurrence to standardise. Catastrophe and other long-tail risks require bespoke analysis and tie up capital for longer.

The intermediary layer is likely to be software-led rather than purely advisory. A platform could use a business’s operating data to estimate its exposure, identify suitable contracts, recommend the hedge size and execute within agreed limits. Firms combining proprietary data with direct exchange connectivity should therefore scale more efficiently than traditional advisers.

Waterhouse VC is already working with White Swan Data on a prediction-market strategy that provides liquidity on regulated exchanges. Its initial focus is sport. The same disciplines of pricing, portfolio construction, collateral management and execution apply elsewhere, but the underlying data and pricing edge do not transfer automatically. We therefore expect specialist teams to emerge around individual risk categories as commercial demand develops.

Prediction markets have made a growing range of events tradeable. The commercial opportunity is to build the underwriting, distribution and capital required to turn those contracts into useful hedges.

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Media

Tom spoke to Ausbiz about how prediction markets platforms are seriously challenging the incumbent sportsbooks, the under-the-radar investor backing some of the world’s largest listed gambling companies.

For wholesale investors interested in following wagering and gaming industry news and trends, please follow our updates on Twitter (@waterhousevc) and WaterhouseVC.com.

DISCLAIMER AND IMPORTANT NOTES

Performance shown is before all fees and expenses and assumes the reinvestment of all distributions on July 1. We make every endeavour to ensure results are accurate. The results are indicative only and subject to subsequent year end external financial review. Past performance is not a reliable indicator of future performance.

Please note the above information in relation to Kalshi, White Swan Data, White Swan Predicts, DraftKings, FanDuel, and Flutter Entertainment is based on publicly available information and should not be considered nor construed as financial product advice. Waterhouse VC has a commercial relationship with the professional betting syndicate described in this update and may benefit financially in the strategy. The information provided in this document is general information only and does not constitute investment or other advice. Readers should consult and rely on professional investment advice specific to their individual circumstances.

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Waterhouse VC is an Australian Unit Trust denominated in AUD and available to wholesale institutional investors worldwide with a minimum of AUD 500,000 or USD / EUR / GBP / JPY / CHF equivalent. This material has been prepared by Waterhouse VC Pty Ltd (ABN 48 635 494 861) (‘Waterhouse VC’, ‘Trustee’, ‘us’ or ‘we’) as the Trustee of the Waterhouse VC Fund (the ‘Fund’). The Trustee is a corporate authorised representative (CAR 1278656) of Sandford Capital Pty Limited (ABN 82 600 590 887) (AFSL 461981) (Sandford Capital) and appoints Sandford Capital as its AFS licensed intermediary under s911A(2)(b) of the Corporations Act 2001 (Cth) to arrange for the offer to issue, vary or dispose of units in the Fund.

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Past performance of Waterhouse VC is not a reliable indicator of future performance. We make every endeavour to ensure results are accurate. Waterhouse VC Pty Ltd does not guarantee the performance of any strategy or the return of an investor’s capital or any specific rate of return. No allowance has been made for taxation, where applicable. We encourage you to think of investing as a long-term pursuit. Waterhouse VC’s results are indicative only and subject to subsequent year end external financial review.

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