The New York Knicks’ NBA playoff run has fueled a frenzy across the city, sending ticket prices soaring and boosting local business revenue for local businesses. It even prompted one Manhattan bar owner to try something unconventional.

The Jeffrey, a craft beer and cocktail bar on Manhattan’s Upper East Side, recently announced a bold promotion ahead of Game 1 of the NBA Finals. The bar promised that any customer who arrived before tipoff would receive a free tab of up to $100, excluding tax and gratuity if the Knicks won, according to Yahoo. (1)

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During the Eastern Conference Finals against the Cleveland Cavaliers, owner Andy Freedman offered customers a 1% discount on their tabs for every point the Knicks netted against the spread. When the team won by an unexpectedly large 37 points, the promotion cost the bar roughly $4,000.

He learned from that. Instead of risking another surprise hit, Freedman found a way to offset the loss: He hedged the promotion using a prediction market.

“If the Knicks win, I cover everyone’s tab,” Freedman explained in a video posted to social media before Game 1, adding that Kalshi would pay for his promotion. (2)

The gamble paid off. The Knicks defeated the Spurs 105-95 in Game 1, leaving the bar on the hook for its promotion while giving sports fans another reason to celebrate. And Freedman was covered. If the Knicks had lost, a bar packed wall-to-wall with paying fans would more than make up the difference.

Kalshi is a federally regulated prediction market that allows users to buy and sell contracts tied to real-world events, including elections, economic data releases, weather outcomes and sporting events.

Unlike traditional gambling, the platform positions itself as a financial marketplace where participants can either speculate on outcomes or hedge against risks.

In the Jeffrey’s case, the odds were stacked against New York, with Kalshi giving the Knicks just a 37% chance of winning Game 1. But a $5,000 bet on the underdog would have turned into a $13,514 payout, an $8,514 windfall, enough to cover drinks for the entire bar.

Kalshi representative Jack Such told Fortune that the company approached Freedman after reading about the bar’s earlier promotion. (3)

“You just ate $4,000 for no reason when you really could have used Kalshi to hedge against that risk,” said Such.

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Hedging itself isn’t new. Airlines routinely hedge fuel prices. Farmers hedge crop prices. Large corporations use derivatives to protect against currency swings, commodity costs and interest-rate changes.

What began as prediction-market infrastructure is now being pitched by Kalshi as a financial safety net for small businesses, offering a way to offset highly specific risks that can make or break a week’s revenue.

For example, restaurants that depend heavily on patio dining could hedge against rainy weather. Retailers might protect themselves against poor sales caused by snowstorms. Importers concerned about tariff changes could potentially use political contracts to offset policy-related risks.

The company says The Jeffrey may be the first small business to publicly use the platform in this way, but it is already discussing similar strategies with other business owners.

The story may make prediction markets sound like a clever financial workaround, but whether you’re considering Kalshi, ForecastEx or another event-based trading platform, there are a few factors worth considering:

Know whether you’re hedging or speculating. For businesses, event contracts may help offset risks with specific outcomes. For most individuals, these markets function more like speculative trades, so it’s important to be clear about your objective before putting money on the line. (4)

Only invest what you’re prepared to lose. Event contracts can expire worthless if the outcome goes against you. While losses are generally limited to the amount invested, that lost investment can still sting.

Don’t confuse prediction markets with a long-term investment strategy. Building wealth typically involves having a diversified portfolio of stocks, bonds and other productive assets. (5)Prediction markets are designed for short-term events versus long-term growth.

Consider liquidity, fees and taxes. Some contracts may be difficult to exit before settlement, especially in quieter markets. Trading fees and taxes can also affect your overall returns. Those depend on where you live and how you use the platform.

For now, prediction markets remain a niche corner of the financial world. But as platforms like Kalshi expand into sports, politics, economics and weather forecasting, they may find a role beyond traders and speculators.

And if one New York bar owner is right, they may even help transform a potentially costly giveaway into a manageable business expense, all while Knicks fans enjoy a few extra drinks.

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Yahoo Finance (1); Instagram (2); Fortune (3); U.S. Securities and Exchange Commission (4); FINRA (5)

This article originally appeared on Moneywise.com under the title: NYC bar owner used Kalshi to hedge the bar’s bets and provided that extra insurance during the Knicks’ Game 1

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