Polymarket-Kalshi Synthetic Arbitrage with Kelly Sizing and Risk Management

How It Works This is a full-stack cross-platform arbitrage system that identifies equivalent markets on both Polymarket and Kalshi, computes the implied probability on each platform, and executes opposing positions when the combined cost of a risk-free basket is below $1.00 after fees. The system covers a broader range of market types than crypto-only implementations, targeting any correlated market pair across the two platforms.

Entry/Exit Conditions An async Python scanner continuously polls both platforms' APIs for matching market pairs. When a price discrepancy exceeds the minimum profitable threshold (fees on both platforms plus slippage buffer), simultaneous orders are placed on both sides. Kelly criterion sizing is applied based on the magnitude of the identified edge. Positions resolve at contract expiry, which serves as the natural exit.

Verified Results No live trading results are disclosed. The system includes an embedded analytics dashboard, suggesting ongoing monitoring and performance tracking. The risk-managed execution framework and Kelly sizing indicate a mature approach to position management beyond simple threshold triggers.

Implementation Notes Built with Python asyncio for concurrent handling of both platform APIs. The analytics dashboard provides real-time monitoring of identified opportunities, execution status, and cumulative P&L. Risk management layers include maximum position size limits, per-market exposure caps, and fee-adjusted opportunity filtering. The system must handle API authentication, rate limiting, and order state management for two separate platforms simultaneously.

Risks Matching markets across platforms requires careful semantic analysis — markets that appear equivalent may have different resolution criteria, creating basis risk. API outages on either platform during a live trade leave a one-sided directional exposure. Regulatory differences between Polymarket (crypto-based, international) and Kalshi (US-regulated) could cause asymmetric market suspensions. Competition from multiple known implementations of this strategy (at least 6 public repositories) suggests the edge is well-known and potentially already arbitraged away in liquid markets.