Arbitrage Prediction Market Tool
Kalshi is a prediction market platform regulated by the CFTC that allows users to trade binary outcomes on real world events, from the winner of the FIFA World Cup to which major US city will have rain on a specific day. Settlements are absolute as contracts resolve to $1 or $0. According to Gomez-Cram et al. (Prediction Market Accuracy: Crowd Wisdom or Informed Minority?), Polymarket, and by extension similar platforms like Kalshi, are primarily driven neither by insider trading nor the wisdom of the crowd. Instead, skilled traders maintain an advantage based on reaction to new information and arbitrage activity on multi-outcome events for guaranteed fixed payouts.
Information asymmetry and informational breakdown has led to potential arbitrage opportunities and pricing mismatch. By scraping market data, comparing implied probabilities based on market supply and demand, and Monte Carlo Simulation, this work can quantify behavioral mismatch. In an example of political elections, comparisons with leading models such as Split Ticket, Quiver Quantitative, Nate Silver's FLIPR, and the Cook Political Report and polling data offers a peek into how real-world events do not follow the adage of "Wisdom of the Crowd."