Kalsi wants small businesses to hedge like Wall Street. A New York bar is trying to promote the Knicks.

Carsi relies on Wednesday Knicks games and New York City bars to show off his hedging strategy for the masses.

A local bar on New York City’s Upper East Side is promising customers they’ll pay everyone’s bill if the Knicks win their first game against the Spurs. Because of hedges, we are able to deliver on that bold promise.

The bar, called The Jeffrey’s, traded Carci for $5,000 for one of seven NBA Finals games on Wednesday night. If the Knicks win, the customer will get a free meal and the bar will collect more than $13,000 from the Carsi contract.

If the team loses, Jeffrey loses money from his contract, but can benefit from the expected large crowd.

Hedging is a risk management strategy typically the purview of Wall Street that traditionally helps large companies and investment funds offset losses by taking opposing positions in existing investments. Hedging includes the use of short sales and inverse ETFs, as well as derivatives such as options and futures.

“Insurance companies limit their downside by offering the worst possible price,” said Jack Such, a spokesperson for the platform. “Without a competitive bidding ecosystem like Kalsi, customers typically walk away with a bad deal. That’s different with Kalsi.”

A Kalsi spokesperson also said that while The Jeffrey is the first and only small business to hedge on the platform, it is in “active dialogue” with other small businesses.

The beer garden’s owner, Carsi, said he first contacted them about hedging after being featured in a Bloomberg News article during last week’s New York Knicks-Cleveland Cavaliers game when the beer garden slashed prices by 37% and lost $4,000.

“I looked into it and thought it was a great idea,” bar co-founder Andrew Friedman wrote in an email to CNBC. “People are fascinated by the idea of ​​hedgerows.”

Kalsi’s spotlight on local bar hedging capabilities for Knicks games comes as states continue to push for aggressive regulation of prediction market platforms, particularly targeting those operating as illegal sports betting operations.

Billionaire philanthropist John Arnold, who invests in research into the impact of sports betting and sports contracts on prediction markets, warned that while sports betting reached more than $160 billion last year, only a “very small portion” reflects a true hedge on the outcome of a match.

Mr. Carsi’s recent move with Jeffrey appears to be a reaction to that backlash. Jeff Kilberg, who runs small-asset management firm KKM Financial, called the marketing effort “fantastic” for Kalsi.

“They’re trying to develop a new customer base,” he says. “If they find 10,000 bars like this, they might just let the genie out of the bottle for Kalsi.”

Michael Tunney, CEO of investment advisory firm Pellaeon Wealth, agrees that the move is smart, but questions why prediction markets can easily promote their services to small businesses.

“We need safety measures from the government side,” he said.

In February, Carsi also entered into a hedging agreement with broker GamePoint Capital to allow sports teams to hedge performance bonus payments. This partnership, like The Jeffrey, comes at a time when sports contract volumes remain subdued relative to other categories. The platform’s volume in May was particularly driven by the NBA playoffs, Piper Sandler analysts said.

Calci’s traders say the Knicks only have a 37% chance of beating the San Antonio Spurs on Wednesday. The first two games of the series will be played in San Antonio. Kalsi Market gives the Knicks a mere 37% chance of winning the championship.

The Knicks last won the NBA championship in 1973, and the Spurs won it in 2014.

Disclosure: CNBC and Kalsi have a commercial relationship that includes customer acquisition and minority ownership.