Kalshi arbitrage explained: How it works in 2026

Kalshi arbitrage trading exploits price differences across the same event contract, giving you an edge when trading on a specific market. While the edge could be beneficial in most cases, you need to consider market fees, slippage, and spreads, which could affect the on-paper profit. Use this page as a reference to understand how to arbitrage prediction markets.What is prediction market arbitrage?Prediction market arbitrage involves buying and selling event contracts for the same event, either within the same market or across different markets, to try to lock in a favorable outcome regardless of how the event resolves. The practice often requires both prices to come together to equal less than $1 when trading or higher than $1 when selling. Want to try spotting arbitrage opportunities yourself? Sign up with Kalshi using promo code ALCOM and trade $25 within your first 30 days to unlock a $25 bonus, giving you extra capital to test strategies like this across Kalshi’s markets.Arbitrage in plain termsArbitrage is a form of simultaneous purchases and selling positions from the same event across different markets to secure a price advantage, aiming for lower risk.Typically, arbitrage involves trading across different platforms, where pricing discrepancies create an opportunity to potentially lock in a favorable position — but sometimes you can pursue arbitrage within Kalshi alone.When opposite market selections (yes & no) add up to less than $1, you’d buy both sides and hold them until the market settles the contracts. One contract will pay you $1 while the other pays $0. You are making a return of $1 despite the cost of both markets combined costing you less. Where things could get complicated is being able to pull off both trades before the market shifts without losing the edge on the price. It’s also worth noting that if the contracts are across two markets, the rules on how they settle should be nearly identical to erase any direct risk.Price = implied probability, and why gaps appearTreat trading prices as Kalshi’s way of showing you the chance of your selected event contract happening. For example, a contract priced at $.62 or 62% is the market’s probability of it happening. Usually, both sides of the event contract will add up to $1. In this case, at $.62/62%, the opposite side would read $.38/38%.As far as gaps within the markets, they can occur on several occasions. Depending on the market, liquidity (handle) could be thin on one market, meaning a larger trade could single-handedly force the prediction market arbitrage. This is sometimes the case when two markets are offering the same event contract, but one has more trading volume than the other. Oftentimes, there are more users in one market than in the other.These “gaps” are never going to be monumental and usually stick between 3 and 5 cents in most cases. However, for those trading larger amounts, the profit is much more significant.Where ‘risk-free’ is a mythNothing is ever a sure thing or risk-free when arbitrage prediction market trading is in play. Your trade is at risk until both sides settle. Also, different prediction markets can have different rules on how those markets settle, despite the wording of those contracts being similar. The price gaps can also disappear before you make the second half of your trade, while fees can also eat into your profits as well, leaving you with plenty of risk of dipping into a negative return compared to your original trade.Kalshi arbitrage involves trading event contracts on the same markets to ensure a profit. Learning how to use arbitrage with prediction markets begins by looking for contracts in which both prices add up to less than $1 to lock in a profit regardless of the outcome. This works within Kalshi with certain factors in play, such as making sure the combined prices are under $1 and making sure the settlement is to cash.Within-market arbitrage - contract prices that don’t sum to $1You can find prediction market arbitrage opportunities within Kalshi alone. The opportunity presents itself when both sides of a market are equal to or less than $1. For example, if a “Yes/No” market has the “yes” option listed at $0.47 and the “no” at $.48, trading on both sides would come out to $.95. With one side settling at $1 and the other at $0, your edge would be $.05. This also works when selling as well if both prices amount to more than $1. If the “yes” price is $.54 and the “no” is priced at $.53, selling both would only cost you $1, leaving you with a profit of $.07 before any fees, which could worsen the edge.This is an “act quickly” situation, as the prices that are equal to or less than $1 when trading or more when selling will only last for a limited number of trades. Trading more will worsen the price, too. How settlement to $1/$0 realises the edgeIn simplest terms, every contract on Kalshi settles at either $1 or $0 if it loses. The difference between what you risk on a trade and what you get back when the market settles is your profit. While there is a small risk that the settlement rules for your trade could ruin the arbitrage opportunity, the risk is minimal when sticking to one market, as the rules are the exact same for both sides. Kalshi will outline the exact rules for each market, which are extremely important to understand, especially when it comes to fees, as they can turn a minimal profit into a loss.What order books and liquidity do to itYou’ll use the order book to decide for yourself whether the gap in price is worth it or not. Depending on the trading volume, your trade could have an impact on the price. In markets that aren’t as popular, you may see one side process while the other sits unprocessed, leaving you exposed to risk. Bigger markets usually allow you to trade both sides, but with tighter prices.You’ll also need to keep in mind that small slippage (the difference between the price you expect to get and what you actually get) could even force winning trades to lose money as well. This forces you to check the order book to make sure you can trade both sides at a profit rather than just trading on the price shown at the time.You’ll use the order book to your advantage and keep an eye on its ever-changing status to make sure that your edge remains in place before trading.Cross-platform arbitrage: Kalshi vs Polymarket USThis is where you’ll find different prices for the same event on both platforms. Our full Kalshi vs Polymarket comparison covers how the two differ overall, but for arbitrage purposes: you’ll buy the cheaper side on one prediction market and the opposite side on the other. When both markets settle, the difference is your profit.There are risks and benefits to Kalshi and Polymarket arbitrage. The biggest and main benefit is that gaps appear far more often than they do on a single market. The risks, though, are being able to fill both markets at the same time, waiting times, and different rules across the platforms.Matching the same outcome across venuesYou’ll first get more into how prediction markets work and the rules that go into setting and grading the markets. You must make sure the official sources they use to grade markets are similar, as even the smallest of differences, like data sources, deadlines, and different rule wording, could make or break your profit.Once you’re sure that both sides are close enough to a match, you’ll make the trade for the cheaper side on one platform and the opposite on the other – ideally within seconds of each other – to ensure your profit. Another smaller detail to keep in mind, though, are the $1 contract on one market not equaling the size on the other, which would take away your ability to hedge.Why prices diverge between Kalshi and Polymarket USKalshi and Polymarket arbitrage price differences come from several reasons, with the main being the number of users on each prediction market platform. Volume comes in from millions of users on each platform, which could alter the prices on each market very differently. That could also lean into different types of traders as well, with one market having a more casual audience, while another is made up of sharps and more of a professional crowd.Both markets also have their own process for changing a move on a specific event contract. Depending on how quickly each market reacts also plays a role in price differences.There is no telling just how long those price gaps can last when a market first opens. On something as heavily traded as the marekts for Kalshi Super Bowl, you could be looking at just a few seconds to a few minutes tops, while less popular markets could remain apart for hours.Want to trade both sides of a price gap? Sign up with Polymarket US using promo code ALCOM and deposit $10 to unlock a $20 trading bonus, giving you extra capital to test strategies like this across Polymarket’s markets.The availability catch for US usersBefore entering any Kalshi Polymarket arbitrage situation, you’ll want to make sure that both prediction markets are not only available and legal in whichever state you’re located, but that both of them are offering that specific market. Kalshi might offer a specific event contract that Polymarket US doesn’t, and not present a prediction market arbitrage opportunity. More into the location, both Kalshi and Polymarket US offer markets that are not accepting trades from within the U.S. Just because you see a market with a price on Kalshi or Polymarket US, it doesn’t mean it is available for trade.Specifically, Polymarket.com is view-only for U.S. traders, while not all of the contracts offered there are available on Polymarket US. You’ll see a label that says “US Users: Featured Price Not Available; Informational Use Only”.Overall, these are what you should keep in mind on the availability front when it comes to how to prediction market arbitrage:Both markets offer the same/very similar event contractsRules for arbitrage markets line upKalshi and Polymarket US are available in your home stateThe event contract is offered in the U.S.A worked arbitrage example (and why the edge is smaller than it looks)Below you’ll find a full example that shows the math behind prediction market arbitrage. All numbers are from non-live markets and do not present any live numbers that could be traded on. They are in place to show you the steps and the expected profit before actual prices drive down the edge.The illustrative tradeIn this example, you’ll see how arbitrage works and how your profit is made when using Kalshi and Polymarket US to ensure a profit.MarketsPricesNotesKalshi price$.41Polymarket US price$.52Total Cost$0.93$.41 + $.52 = $0.93Payout $1Profit before costs$0.07$1 - $0.93 = $0.07In simplest terms, the difference between the combined prices on Kalshi and Polymarket US to $1 are going to be your gross profit before any fees kick in, potentially lowering it even more. This same example works when selling as well. MarketsPricesNotesKalshi price$.53Polymarket US price$.54Total Cost$1.07$.53 + $.54 = $1.07Max. you can lose $1Profit before costs$0.07$1.07 - $1.00 = $0.07You’ll receive a $0.07 profit here by putting up the $1.07 up front, with the maximum dollar amount you could lose being $1, leaving you with $0.7. When you’re ready to make your trade and take advantage of prediction market arbitrage, you’ll keep in mind:The order book shows how many are available to trade at those prices.The rules of each side of the market on Kalshi and Polymarket US.How long it takes to fill both sides.Fees, spreads and slippage vs the gross edgeFeeding off the previous example for trading, $0.07 is just the gross profit. Fees, spread, and slippage could heavily impact and lower your actual profit. For example, your profit could be cut down to as low as $0.025, all things considered.ItemEffect on profitAmount Gross profitYour starting profit margin$0.07Kalshi trading fee at that priceRoughly $0.02 fee -$0.02Polymarket US trading fee at that priceRoughly $0.015 fee-$0.015SlippageA higher trade amount could force a worse price (usually $0.01)-$0.01Net profit remainingAfter all costs are settled+$0.025In all, after all fees and profit-altering costs as well as how much your initial trade is worth, you’ll decide if the end return is worth the risk. For those trading larger unit sizes, your profit could be significantly larger than that of a casual trader.The real risks arbitrage doesn’t removeEven when the trade and profit look perfectly aligned, there are risks that remain that arbitrage prediction markets cannot explain. Especially when looking at Kalshi/Polymarket arbitrage markets with differing rules, order book statistics, and your capital being locked up until the market settles. All three of which will be covered below.Divergent resolution/settlement rules between venuesAt first glance, event contracts may look the same on two different platforms, but within the rules, they could grade differently and leave you with exposed risks. Those risks are more evident when trading across multiple platforms and not on a single market, as they each follow their own grading procedures. Some of the key points regarding rules include:Official sources used for grading: One market may use an official source from a league or governing body, while the other may use a private data provider. If the sources disagree with one another, you’re at risk of losing the edge.Cutoff times: Even a difference of a few hours in the official end time can change the result. A late data release or news event that falls between the two cutoffs can make one side win, and the other lose.How markets treat postponement, cancellations, and voided markets: Markets have different rules for the following, with one being more willing to void the contract and return your trade amount, while the other will let the settlement play out, even if it takes an extended period of time.Wording differences among market rules: Even the smallest of differences could make a difference for your trade. What may look like the same event contract could differ based on the wording. Liquidity, slippage and being unable to fill both legsThe first price that you come across on both markets is not always a guarantee and could quickly disappear from the moment you notice the gap to the time you actually place the trade. One side could go through while the other remains unfilled, leaving you with just the one trade on the single market.If you find the price has changed on the second market, and you try to force the trade despite what the order book says, you could get a worse price and even dip into a loss. The slippage could completely take your edge away, especially in markets that are not as popular. Forcing the trade without checking the order book is one of the most common reasons that arbitrage trades fail to make a profit.Your risk is exponentially larger when executing a Kalshi Polymarket arbitrage opportunity, as they do not share the same system, and there is no way to trade both sides at the same time. Capital lockup until resolution and platform/counterparty riskOnce your arbitrage trade is in, your money is locked up and cannot be taken out until the contract settles. Depending on the event you trade on, your money could be locked up for as little as a few hours to several weeks.The amount of time your capital is locked up is a crucial point in determining if the arbitrage is actually worth the risk and hold or not. For example, a Kalshi arbitrage trade that offers a three-cent edge, but ties up your funds for weeks, offers less of a return than multiple smaller edge arbitrage trades that settle in days.Kalshi arbitrage bots and tools For those really looking for the edge, a Kalshi arbitrage bot is a tool that traders use to monitor prices not just on Kalshi but across several prediction markets in search of price gains and arbitrage opportunities. The prediction market arbitrage bot will then alert you when to take action on gaps to take advantage of the edge.What a Kalshi arbitrage bot doesEssentially, you could train the prediction market arbitrage bot to do exactly what you need it to. The main goal for them, though, is to read through order book statistics for a specific event contract on different prediction markets and show you where there is an edge. These bots will consider all things before showing you what the real edge is, including market fees and any slippage. All of those costs are subtracted by the bot’s programming so that there are no discrepancies on your end.Other than just comparing the markets and showing you the profit margins, these bots will also warn when an edge isn’t worth the risk. Going back to the fees and slippage warning, all of those are taken into consideration before the bot suggests that contracts on both markets do not match up well.While prediction market arbitrage bots do lay out all you need to know, it’s still best to check back to the rules of the contract and confirm that you can trade both sides when it suggests.Limits, costs and pitfalls of automating itAutomation does not fix basic problems that may be wrong in the market. Data collection could be slow, and liquidity could disappear. While a bot may show you a profit margin at one cost, it may only be available for a few contracts, meaning by the time you are ready to place the trade, that profit margin could be gone.You also run the risk of the bot computing the wrong fees and slippage numbers, which could send a bad alert to trade and lose you money in the end. All in all, these bots cost not just money to build, but plenty of time as well. They are only given numbers and feed off what information they have. They cannot predict any fees, rule changes, or outside impact on the market.Is prediction market arbitrage worth it?Whether prediction market arbitrage is worth it or not comes down to what your starting trading unit size is, the amount of time you plan to invest, and what your realistic expected return is. It could be rewarding for those who start with more capital and are content with the profit after all costs. Those starting with lower capital and more of a casual trader may not find it worth the time and risk for the amount of return.Who it might suit and who it won’tIf you have the time, patience, and ability to lock up capital for longer periods of time for a slightly smaller return, prediction market arbitrage would suit you. If you are someone who casually trades on big events and in smaller quantities, arbitrage trading may not be for you.Going back to the time and patience, arbitrage trading requires you to constantly check order book details as well, and monitor gaps and edges, and they come and go.Casual traders who are sold on the “risk-free” factor without doing their homework on the actual risks that the best prediction market apps present when arbitrage trading could end up with negative returnsIf you are just starting, you’ll want to make sure that you understand how prediction markets work, keep records of your trades, and always assume that there is a risk until both sides of the arbitrage are filled.A realistic view of the returnsAfter fees, slippage, and spreads are taken into consideration, your profit margin is cut down significantly or even into a negative return, depending on how much your trades are worth. The total profit is small compared to how much money and time you’ll invest from start to finish. This is not seen as a high-return trading strategy.You’ll often find that the best edges come on the more popular markets; however, that profit margin could disappear quicker with only a few trades accepted at the profit price.Is arbitrage legal and how is it taxed?Arbitrage trading and all that it entails are legal on a regulated prediction market offering event contracts. It is just another form of trading. The prediction market is regulated under the Commodity Futures Trading Commission (CFTC). As far as taxes, you are responsible for tracking your wins and losses and reporting them as you see fit. Legality on CFTC-regulated venuesAll prediction market arbitrage is done on regulated platforms under the CFTC. Buying and selling different event contracts on different prediction markets is legal and allowed at the federal level. You must keep in mind, though, that just because arbitrage prediction markets are legal and federally regulated, you may not always be able to access them. Put simply, state governments still have the final say on whether or not they can accept traders from within their borders. Over 40 states and Washington D.C., currently allow Kalshi to accept traders without any restrictions. There are eight states in which either Kalshi is unavailable or restricts usage to select event contracts and markets. Below are the states where you can sign up and trade on Kalshi without any limitations.Below are the states where you can sign up and trade on Kalshi without any limitations, check the offer for the current Kalshi promo code before you register.AlabamaAlaskaArkansasCaliforniaColoradoConnecticutDelawareFloridaGeorgiaHawaiiIdahoIndianaIowaIllinoisKansasKentuckyLouisianaMaineMinnesotaMississippiMissouriNebraskaNew HampshireNew MexicoNew YorkNorth CarolinaNorth DakotaOklahomaOregonPennsylvaniaRhode IslandSouth CarolinaSouth DakotaTennesseeTexasUtahVermontVirginiaWashingtonWest VirginiaWisconsinWyomingWashington D.C.Arizona, Massachusetts, Maryland, Michigan, Montana, New Jersey, Nevada, and Ohio all either restrict you from using Kalshi completely or limit the markets that you can trade on. Prediction markets are not subject to following any sports betting or gambling regulations in states that have a regulated market.Tax and record-keeping basicsProfits and losses from prediction markets can usually be reported. The amount you’ll pay, the report, and the documents that you might need all depend on your personal tax situation and the tax laws in your state. This is where keeping track of all of your trades on multiple platforms becomes important, so that you can go back and accurately find the numbers you’re looking for. When cross-platform arbitrage trading, you’ll want to keep track of all trades on both markets.Not only is keeping records for tax purposes important, but it can also show you how your trade did as well as improve your tracking calculations even more.Kalshi arbitrage FAQHow do you arbitrage prediction markets?In simplest terms, you’re searching for prices on different prediction markets on the same event contract that add up and create a small profit when trading correctly and accurately. You’ll trade the cheaper sides on each platform and wait until the market settles, with your difference being the profit.While it is popular to arbitrage between two different markets, it could also be done within the same market. Whether you lock in a profit or not depends on the fees, how quickly you execute the trades, and whether both sides can be filled or not. You’ll also consider the rules for the event contract as well.Is Kalshi arbitrage really risk-free?Plain and simple, no. Your trade is always going to be at risk until the contracts settle. Liquidity could go away, contract rules could be different, and fees and slippage could shrink and even take away your profit as a whole. Some risks remain even if the profit margin looks locked in. Referring to prediction market arbitrage trading as “risk-free” is a misconception.Can you arbitrage between Kalshi and Polymarket US?Yes, Kalshi and Polymarket US are the two main prediction markets used for prediction market arbitrage. Make sure you take all of the steps into consideration on how to arbitrage prediction markets, such as similar rules, price matches, order book statistics, and whether the trade is available at the current price. Most importantly, you can only trade what is available on both Kalshi and Polymarket US. All markets that you see on Polymarket.com are not always available on Polymarket US.How much can you realistically make from Kalshi arbitrage?All things considered, after fees and slippage against the spread, your profit could be cut by more than 50%. It’ll depend on how much money you put in to start and keep locked in until the contract is settled. Overall, this is a limited trading strategy that offers limited profit based on how much your initial trade is worth.If you purchase a product or register for an account through a link on our site, we may receive compensation. By using this site, you consent to our User Agreement and agree that your clicks, interactions, and personal information may be collected, recorded, and/or stored by us and social media and other third-party partners in accordance with our Privacy Policy.