**dataset:** 72.1m trades and $18.26b volume on kalshi (2021-2025)
**core findings:**
1. **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.
2. **wealth transfer:** liquidity takers lose money (-1.12% excess return) while liquidity makers earn it (+1.12%).
3. **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.
4. **category variation:** finance markets are efficient (0.17% maker-taker gap) while high-engagement categories like media and world events are inefficient (>7% gap).
5. **mechanism:** makers do not win by out-forecasting takers. they win by passively selling “yes” contracts to optimistic bettors.
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**tl;dr**
**dataset:** 72.1m trades and $18.26b volume on kalshi (2021-2025)
**core findings:**
1. **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.
2. **wealth transfer:** liquidity takers lose money (-1.12% excess return) while liquidity makers earn it (+1.12%).
3. **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.
4. **category variation:** finance markets are efficient (0.17% maker-taker gap) while high-engagement categories like media and world events are inefficient (>7% gap).
5. **mechanism:** makers do not win by out-forecasting takers. they win by passively selling “yes” contracts to optimistic bettors.