Cross-Platform Arbitrage between Polymarket and Kalshi
Exploits price differences between prediction markets on Polymarket and Kalshi using automated bots with Kelly sizing and risk management.
This strategy monitors identical or highly correlated prediction market contracts listed on both Polymarket and Kalshi. When a price discrepancy exceeds a configured threshold (e.g., due to liquidity imbalances or delayed price updates), the bot simultaneously buys the undervalued contract on one platform and sells the overvalued contract on the other. The execution is fully automated, using real-time order book data and websocket feeds. Entry is triggered when the spread exceeds transaction costs plus a minimum profit margin; exit occurs when prices converge or after a predefined time-limit to reduce exposure. Results from several public repos (e.g., samuel483/poly-kalshi-arb, tduic/prediction-market) show consistent small-margin profits with low risk per trade. Implementation uses Python with async IO, integrates both platform APIs, and applies Kelly criterion for position sizing to optimize long-term growth while controlling drawdowns.