jonbecker

If we weight by contracts purchased the gap is 1.02%, dollar weighted the gap is 1.00%.

I'm glad you enjoyed the paper :)

super interesting, re: spending money to move the line is just another form of non-profit-seeking "consumption."

i didn't filter for manipulation specifically, but i did find that politics was actually one of the most efficient categories (only ~1% maker/taker gap), suggesting the market absorbs those flows pretty well.

i understand how probability works. the "93 cents" vs "43 cents" comparison is looking at realized historical data, not theoretical odds. if the markets were efficiently priced, you would get 100% back. the entire point of the paper is showing that, historically, they aren't efficiently priced (longshots return ~43%), and explaining who captures that inefficiency.

tl;dr

dataset: 72.1m trades and $18.26b volume on kalshi (2021-2025)

core findings:

longshot bias: well documented longshot bias is present on kalshi. low probability contracts are systematically overpriced. contracts trading at 5 cents only win 4.18% of the time.

wealth transfer: liquidity takers lose money (-1.12% excess return) while liquidity makers earn it (+1.12%).

optimism tax: the losses are driven by a preference for "yes" outcomes. buying "yes" at 1 cent has a -41% expected value. buying "no" at 1 cent has a +23% expected value.

category variation: finance markets are efficient (0.17% maker-taker gap) while high-engagement categories like media and world events are inefficient (>7% gap).

mechanism: makers do not win by out-forecasting takers. they win by passively selling "yes" contracts to optimistic bettors