Lottery-fication of Everything: 0 day options, perps, parlays are now mainstream

Summary

The breakout finance products of the past decade converge around a single design: a highly engineered lottery. Small, low probability bets with asymmetric upside. Narrative appeal so you can craft a story around your bet. Based on luck, but gives you an illusion of skill. Rapid feedback loops so you win or, more likely, lose money within hours.In this post, I cover parlays, zero day options, and perpetuals: seemingly obscure products that have exploded in adoption to reach mainstream people.Sports betting adoption didn’t take off until FanDuel designed a lottery inside it. The most important invention in modern betting is the same game parlay: a single bet that combines multiple independent bets within the same game. Parlays transformed the user experience for casual sports fans. Now, fans can achieve lottery-style outcomes within a few hours of a sports game by betting something as small as five dollars to win a thousand dollars. They can craft a story behind the bet, giving them the perception of skill. When Dallas Mavericks owner Mark Cuban said that Russel Westbrook was not a super star, a sports fan could build a parlay around his revenge: Westbrook will answer the insult by scoring over thirty five points, have at least ten assists, and take his team to victory. Sports is reality TV for men; parlays keep them glued to their screens because now they have a stake in the outcome.$150 billion was wagered on sports in 2024. Parlays contribute to two-thirds of sportsbook revenue and to the significant increase in hold, which is sportsbooks’ profit margin on all bets. Sportsbook hold has doubled from 6% when parlays were just introduced to over 12% today.Parlays allow players to place a small bet for life-changing upside. But each leg of the parlay must be won for the player to win the bet, which drastically shrinks the odds. You would have a far higher probability of winning money if you placed all bets individually rather than placing a single parlay bet, but then ...