AQR Capital Management, one of the leading global quantitative hedge funds, is carefully evaluating whether sports betting could be its next frontier. Co-founder and CIO Cliff Asness discussed this possibility during a special 10th anniversary episode of the Odd Lots podcast, noting that the firm is examining what such a move would entail.

Prediction Markets Are Attracting High-Profile Investors

While AQR’s plans are still in their infancy, the timing is no coincidence. Prediction markets such as Kalshi and Polymarket have drawn some of the leading names in finance into what many still consider a legal gray area. By packaging sports outcomes as regulated financial contracts, they have created a hybrid marketplace where the boundary between betting and derivatives trading is getting increasingly blurrier.

Other firms have already ventured into the market. Intercontinental Exchange, the parent company of the New York Stock Exchange, has pledged up to $2 billion toward Polymarket. Susquehanna International Group has built a dedicated sports unit and is actively making markets on Kalshi. An AQR entry into the market would cement this trend as it seeks to explore a data-rich ecosystem.

Asness did not disclose whether AQR is considering directional wagering or if it would focus on liquidity provision, an area where quantitative approaches generally excel. However, the CIO indicated that the company sees a connection between its core expertise and the structure of modern sports markets that it can leverage.

Betting Culture Is Not Without Its Downsides

Sports analytics are an integral part of AQR’s corporate culture. Asness himself co-wrote a 2018 academic paper that analyzed the most effective goaltender-pulling strategy in hockey. He suggested that such insights reflect the similar behavioral biases AQR studies in equity and futures markets. According to Asness, betting markets have not fully embraced data-driven decision-making, resulting in potential inefficiencies.

We think that, particularly in the betting markets, people are probably not as rational. So we do believe there might be opportunities there.

However, Asness expressed some skepticism about what he calls the “gamification” of everyday investing. He was concerned that this trend was increasingly often causing retail bettors to wager more than they could afford. Asness further lamented that the rising sports betting culture was causing fans to care less about supporting their teams and more about their prop bets.

AQR’s decision on whether to enter the market may depend on the regulatory uncertainty hanging over the sector. Prediction platforms argue their contracts fall under federal commodities law, while individual states increasingly challenge that assumption. Meanwhile, the CFTC has declined to take a firm stance, leaving operators to operate in the gray area between financial regulation and gambling law.