An NYC bar promised free drinks if the Knicks win. Its owner is using Kalshi to hedge the risk.

The New York Knicks are (finally) in the NBA Finals again, and New York City is losing its mind.

It has been 27 years since the team has run this deep into the playoffs, and fans are embracing the moment. Mayor Zohran Mamdani signed a lighthearted executive order abolishing bedtimes for kids during the championship series. Officials are painting subway stops orange and blue. And tickets to the Knicks' first home game at Madison Square Garden are going for $4,481 to $104,679 on Stubhub.

Now, an Upper East Side beer garden is joining in on the Knicks mania.

The Jeffrey, a neighborhood bar on the Upper East Side, is taking the basketball fever dream to its logical conclusion: free drinks if the Knicks win game one of the series — and a $5,000 Kalshi trade to soften the blow if they do.

Andy Freedman, The Jeffrey's owner and a co-managing partner at Olshan Frome Wolosky, told Business Insider he placed a $5,000 "YES" trade on Kalshi, the prediction-market platform, backing the Knicks to win. If they do win, he said, the trade would pay out around $13,500.

The payout money would help offset the cost of comping a room full of euphoric Knicks fans, he said.

If the Knicks lose, Freedman loses the $5,000. But he's betting the promotion will still pack the bar enough to make the night worthwhile.

It's at least the second bet The Jeffrey has placed on the basketball team this playoffs. In an Instagram post, the bar said it offered "1% off their tabs for every point the Knicks won by," during game four of the Eastern Conference finals.

The Knicks won by 37 points, costing the bar nearly $4,000 in revenue.

Kalshi — a business hedge?

Kalshi, which is regulated by the Commodity Futures Trading Commission, is pitching the promotion as the first documented instance of a small or medium-sized business hedging event risk through a prediction market. The trading platform pitched The Jeffrey's owners on the deal, according to Semafor, and didn't respond to Business Insider's questions about its involvement in the bar's promotion.

In a press release, the trading platform called the bet "small business insurance."

The logic behind the hedge is simple enough: businesses are exposed to weird, specific risks all the time. A restaurant might lose traffic because of rain, or a hotel might raise prices if the playoff series extends to seven games.

Kalshi said its products can ensure payouts if something unforeseen harms its business.

"Traditional insurance is expensive," Nicolas Hull, a company spokesperson, wrote in a press release. "Kalshi changes the equation: liquid, transparent markets that let any business take an offsetting position on the risks that affect their bottom line."

Federal regulators have long treated hedging as a legitimate use of commodities markets, such as when American farmers hedge their investments against potential poor yields. The CFTC declined to comment.

There is, of course, a very New York wrinkle here: The Jeffrey is not hedging against a drought, a supply-chain shock, or a rainy weekend.

It is hedging against the Knicks.

For a city that has spent nearly three decades waiting for another Finals run, that may be the most natural business risk in town.

Kalshi has the Knicks' probability of winning game one at 37%.