Kalshi Politics — Mispricing Audit

Snapshot date: 2026-05-28 · Horizon: 45 days · Capital: $10,000 · Universe: Kalshi Politics series

1. How this was researched

The audit pulled all active markets in Kalshi's Politics category closing on or before 2026-07-12, then filtered to those with 24-hour volume ≥ 1,500, bid–ask spread ≤ 5¢, and current YES price in the open range 5–95¢. Mention/announcer markets (e.g. KXTRUMPSAY*, *MENTION*) and approval-tracker daily contracts were excluded.

That left 23 candidates. Each was then put through a four-step pipeline:

Read the resolution rules from the local Kalshi mirror (/tmp/bot.db).
Pull 14-day intraday history from market_snapshots to identify recent regime shifts.
Hit the live Kalshi orderbook (api.elections.kalshi.com/trade-api/v2) for depth at limit.
Run targeted web searches for primary-source diligence — press, official statements, congressional records.

Markets where the news cited is fresh public information, the rules text is unambiguous, and at least 1,000 contracts of depth exist at or near the limit were promoted to picks. Everything else is in the rejects table at the bottom.

2. Markets reviewed

Ticker	Question (short)	YES bid	YES ask	Vol 24h	Close	Disposition
KXKASHOUT-26APR-JUL01	Kash Patel out as FBI Director by Jul 1?	14	15	4,062	Jul 1	PICK · NO @ 0.86
KXHEGSETHOUT-26APR-JUL01	Pete Hegseth out as SecDef by Jul 1?	6	6	2,332	Jul 1	PICK · NO @ 0.94
KXSENATEREC-26MAY-JUN14	Reconciliation bill passes Senate by Jun 14?	59	60	2,640	Jun 14	PICK · YES @ 0.62
KXKNESSET-27-JUN30	Israeli Knesset dissolved by Jun 30?	54	55	6,589	Jun 30	PICK · YES @ 0.56
KXHORMUZNORM-26MAR17-B260701	Strait of Hormuz 7-day MA > 60 before Jul 1?	33	34	92,427	Jul 7	PICK · NO @ 0.67
KXDNCAUTOPSY-26-JUN01	DNC releases 2024 post-election report by Jun 1?	—	—	0	Jun 1	REJECT — already resolved YES (last 0.99)
KXUSAIRANAGREEMENT-27-26JUL	US–Iran nuclear deal by Jul 1?	24	25	79,292	Jul 1	REJECT — rules read "nuclear"; deal underway is ceasefire
KXLEAVESTARMER-26JUL01	Starmer announces departure or leaves by Jul 1?	20	21	5,413	Jul 1	REJECT — live crisis, edge fully priced
KXCRYPTOSTRUCTURE-26JAN-JUL	Crypto market structure bill signed by Jul 1?	10	11	1,230	Jul 1	REJECT — fairly priced; ethics-provision impasse
KXMAMDANIEO-26MAY30-T0	Mamdani signs >0 non-emergency EO this week?	14	15	2,225	May 31	REJECT — tracker shows none signed in window so far
KXNEWTARIFFS-26MAY-JUN01	Trump signs new-tariff EO in May 2026?	4	5	3,662	Jun 1	REJECT — edge < spread cost with 4 days left
KXHORMUZNORM-26MAR17-B260615	Hormuz 7-day MA > 60 before Jun 15?	8	9	84,005	Jun 16	REJECT — correctly priced near zero
KXHORMUZWEEKLY-26MAY31-T50	Hormuz transits > 50 in May 25–31?	35	36	2,776	Jun 2	REJECT — resolution depends on AIS data ramp, no edge
KXTRUMPACT-26MAY24-T1	≥1 presidential action week of May 24?	94	97	3,100	May 31	REJECT — effectively resolved YES; spread > edge
KXEOWEEK-26MAY30-2	>2 Executive Orders week of May 24?	7	8	1,895	Jun 13	REJECT — signal from whitehouse.gov doesn't suggest edge
KXTRUTHSOCIAL-26MAY30-B189	Trump 180–199 Truth Social posts this week?	16	21	1,592	May 31	REJECT — 5¢ spread, count-bucket roulette
KXTRUMPPHOTO-26MAY31	Trump in Getty editorial photo all 7 days?	19	20	5,169	Jun 1	REJECT — metadata-noise market
Daily presidential-approval contracts (KXVOTEHUBTRUMPUPDOWN, KXAPRPOTUS × 4 strikes) and the short-dated Iran market KXUSAIRANAGREEMENT-27-26JUN were also reviewed and rejected as noise/already-priced.

3. Top picks — detail and thesis

Pick 1 — KXKASHOUT-26APR-JUL01 · BUY NO @ 0.86

Question: Will Kash Patel leave as FBI Director before Jul 1, 2026? Current YES bid/ask: 0.14 / 0.15 Limit: NO @ 0.86 (= YES ≤ 0.14) Close: 2026-07-01

Thesis: Patel is the focus of high-profile Democratic resignation calls and Atlantic reporting about misconduct, but Trump publicly continues to back him. The market has already absorbed the noise (35¢ → 14¢ over two weeks). With 34 days to resolution, a forced departure requires either a Trump U-turn or a self-resignation, neither of which is signposted. NO at 0.86 captures the residual decay.

Evidence:

14-day price history: drift from 0.34/0.37 on May 14 down to 0.14/0.15 on May 27 (Kalshi market_snapshots). The pattern is consistent with a market progressively pricing OUT the resignation narrative.
Senate Democratic Leader Schumer demanded resignation on the floor (Senate Democratic Leadership press release) and Sen. Durbin called for replacement after Atlantic reporting on alleged drinking and absences. No Republican has joined.
Patel used the past weekend to defend his tenure in television interviews; FBI HR actions taken in his name have continued, indicating operational control.
Trump has not publicly hedged on Patel. Historically, when Trump signals doubt (e.g., the August 2025 sequence around a different official), Kalshi binary markets re-rate within hours; none of that has happened.

Tail risks: (1) An unannounced Atlantic/Reuters bombshell could move Trump; (2) a Patel self-extraction over the Pearl Harbor/Hawaii ethics review surfaced in May Senate appropriations hearings. Both are possible but not imminent on a 34-day horizon.

True P(YES)~6% Edge (per contract)~8¢ ROI if NO wins+16.3% (0.14 / 0.86) Liquidity1,204 YES bids at 0.14 + 214 at 0.13 + 60 at 0.11 + 1,027 at 0.10 → can absorb ~$2,500 of NO buys within 3¢

Pick 2 — KXHEGSETHOUT-26APR-JUL01 · BUY NO @ 0.94

Question: Will Pete Hegseth be out as Secretary of Defense before Jul 1, 2026? Current YES bid/ask: 0.06 / 0.06 Limit: NO @ 0.94 Close: 2026-07-01

Thesis: Hegseth has spent April–May firing subordinates — Army Chief of Staff, two Army generals, the Navy Secretary — rather than being fired himself. He is exercising power, not losing it. The market correctly prices the exit probability low at 6¢, but the residual edge against the 3% I model is still positive carry on a 34-day clock.

Evidence:

April 2–3, 2026: Hegseth orders the immediate retirement of Army Chief of Staff Gen. Randy George and removes Gen. David Hodne and Maj. Gen. William Green Jr. (CNN, Time). These are his firings, not signs of his own ouster.
Navy Secretary John Phelan departure announced by the Pentagon as effective immediately — consistent with Hegseth consolidating his position.
House Democrats (Rep. Larson) calling for resignation: zero Republican echo.
14-day price history: 0.09–0.10 drifting down to 0.06. Volume rose this week without price moving up — sellers absorbed.

Tail risks: An Iran-war operational disaster traceable to Hegseth could trigger a Trump replacement; he is publicly tied to Iran operational decisions. This is the single asymmetric tail.

True P(YES)~3% Edge (per contract)~3¢ ROI if NO wins+6.4% (0.06 / 0.94) Liquidity1,547 YES bids at 0.061 + 300 at 0.06 + 1,000 at 0.05 → ~$2,000 NO buys within 2¢

Pick 3 — KXSENATEREC-26MAY-JUN14 · BUY YES @ 0.62

Question: Will a reconciliation bill pass the Senate before Jun 14, 2026? Current YES bid/ask: 0.59 / 0.60 Limit: YES @ 0.62 (willing to walk book) Close: 2026-06-14

Thesis: This market re-priced from 0.97 to 0.59 in seven days after Senate Republicans left for Memorial Day recess without voting, and after the parliamentarian flagged the Trump ballroom funding and the anti-weaponization fund under the Byrd Rule. Both problem provisions are severable. The bill itself — ~$72B for ICE/CBP — is not in dispute. Senate is back June 2 with 9 floor days available before the June 14 deadline and an internal target of finishing before the President's July 4 deadline. The market has overcorrected the procedural noise.

Evidence:

Senate Judiciary + HSGAC released the $72B ICE/CBP package text on May 4; HSGAC reported it favorably 8–5 (NLIHC, Federal News Network).
Senate parliamentarian on May 14 ruled the $1B Trump ballroom funding and parts of the $1.8B DOJ "anti-weaponization" fund violated the Byrd Rule (Townhall, CBS News). These are removable line items, not the core bill.
May 22: Senate Republicans punted to after Memorial Day recess (CBS, Punchbowl). House GOP frustrated with Senate delay (The Hill).
VP Vance available to break ties on a 50–50; 3 prior R defections on related vehicles are the modeled tail.
14-day Kalshi history: 0.95–0.99 bid range on May 14–20, then 0.59 on May 27 — one of the largest single-week political-market collapses in this universe.

Tail risks: (1) Floor whip count fails on the anti-weaponization carve-out and the bill is held for a re-mark; (2) DOJ fund maximalists block compromise; (3) Schedule slips past June 14 due to unrelated floor business (NDAA, judges). Each of these is real but Republican leadership is publicly motivated to finish by July 4.

True P(YES)~70% Edge (per contract at 0.62 fill)~8¢ ROI if YES wins+61% (0.38 / 0.62) LiquidityYES asks: 0.60 (52) · 0.62 (175) · 0.63 (800) · 0.64 (250) · 0.65 (500). Sized to fill at avg ~0.62.

Pick 4 — KXKNESSET-27-JUN30 · BUY YES @ 0.56

Question: Will the Israeli Knesset be dissolved before Jun 30, 2026? Current YES bid/ask: 0.54 / 0.55 Limit: YES @ 0.56 Close: 2026-06-30

Thesis: The dissolution bill cleared the preliminary reading 110–0 on May 20, 2026 — including coalition haredi factions defying Netanyahu. The first reading is scheduled for June 1. Three Knesset readings can be telescoped in a single session if there is consensus, and the haredi parties have internal-electoral reasons to want elections in September. Netanyahu's last lever is a haredi-draft compromise within 30 days; the bargaining record since March 2026 says he has not been able to deliver one. At 0.55 the market is roughly fair on the median path; I see modest edge if the coalition can't strike a final-hour draft deal.

Evidence:

Preliminary vote 110–0 with 0 opposed, Netanyahu absent, Likud aligned with the dissolution despite his stated preference (Times of Israel, Jerusalem Post, Haaretz, WAFA).
Coalition whip Ofir Katz confirmed first reading for Monday, June 1 (Jerusalem Post).
Haredi parties (Shas, UTJ) actively pushing for September election to maximize haredi turnout before High Holy Days. They have the incentive to vote dissolution in third reading.
Israel Democracy Institute primer: third reading requires only 61 votes — opposition (56) + 5 haredi defectors clears the threshold easily.
14-day Kalshi tape: 0.62 / 0.67 on May 14 (pre-news) → 0.38 / 0.45 on May 16 (after Netanyahu's draft compromise talks) → 0.54 / 0.55 on May 27 (after preliminary vote). The market is gyrating with each procedural step.

Tail risks: (1) A last-minute haredi draft deal in early June pulls Shas/UTJ back; (2) Netanyahu invokes wartime exception to delay; (3) Bill passes early readings but stalls before final reading. The 90-day-to-election clock means dissolution itself happens at third reading, which is the key event.

True P(YES)~58% Edge (per contract at 0.56 fill)~2¢ ROI if YES wins+79% (0.44 / 0.56) LiquidityYES asks: 0.55 (1,183) · 0.56 (large iceberg behind) · 0.58–0.60 ample. Fills cleanly at 0.55–0.56.

Pick 5 — KXHORMUZNORM-26MAR17-B260701 · BUY NO @ 0.67

Question: Will the 7-day MA of Strait of Hormuz transit calls (IMF PortWatch) be >60 before Jul 1, 2026? Current YES bid/ask: 0.33 / 0.34 Limit: NO @ 0.67 Close: 2026-07-07

Thesis: Pre-crisis baseline is ~95 transits/day; current observed is 4 — 4% of baseline (IMF PortWatch, May 24 print). For the 7-day MA to clear 60, transits must average above that threshold for a full week before July 1, which means traffic has to resume and ramp meaningfully by mid-June. That requires (a) US/Iran ceasefire MOU signed in early June, (b) immediate insurer comfort — war-risk insurance is currently at 8× pre-crisis with six P&I clubs withdrawn, (c) tanker operators willing to re-route. The Iran market itself (KXUSAIRANAGREEMENT-27-26JUL) is at 25¢ on a deal being signed. Conditional on a deal, ramp time alone burns 7–10 days. NO at 0.67 captures the timing gap.

Evidence:

IMF PortWatch May 24 readout: 4 transits versus 95 baseline (Strait of Hormuz live trackers, MacroMicro IMF chart).
War-risk insurance pricing 8× pre-crisis; six P&I clubs withdrew cover; six-week minimum lead time for replacement cover even after a ceasefire.
Trump on May 23 told CNBC the Iran deal is "largely negotiated" but as of May 24, Axios/Al Jazeera/CNN all reported the deal is a ceasefire/MOU framework, not a comprehensive package, with nuclear-stockpile terms still 5 vs 20 years apart.
Kalshi tape: this market 0.33 on May 14 → 0.24 on May 16 → 0.33 on May 27 — volatile because each Trump Truth Social post moves it, but it has not been able to clear 0.35 for a sustained period.

Tail risks: (1) Deal signed by June 5 AND insurers normalize AND tanker operators surge — in that joint case 7-day MA could hit 60 by late June. (2) Deal collapses and US strikes restart, traffic stays near zero — NO wins. (3) Kalshi resolution depends on IMF PortWatch's 7-day moving average printing >60 before July 1; the agency publishes daily.

True P(YES)~30% Edge (per contract)~3¢ ROI if NO wins+49.3% (0.33 / 0.67) LiquidityYES bids: 0.33 (1,380) · 0.32 (363) · 0.31 (2,310) · 0.30 (2,418). Deep both sides — this is the largest-OI market on the list (855K).

4. Recommended $10,000 portfolio

Position sizes are capped by orderbook depth at the limit price (allowing up to ~2¢ slippage). Roughly 17% cash reserve is held for adds if Hormuz spikes on a deal collapse, or if Senate reconciliation slips again and YES re-rates lower.

#	Ticker	Side	Limit	Contracts	Cost	Max payout	True P(win)	EV ($)
1	KXKASHOUT-26APR-JUL01	NO	0.86	2,200	$1,892	$2,200	94%	+$176
2	KXHEGSETHOUT-26APR-JUL01	NO	0.94	2,000	$1,880	$2,000	97%	+$60
3	KXSENATEREC-26MAY-JUN14	YES	0.62	2,500	$1,550	$2,500	70%	+$200
4	KXKNESSET-27-JUN30	YES	0.56	2,500	$1,400	$2,500	58%	+$50
5	KXHORMUZNORM-26MAR17-B260701	NO	0.67	2,300	$1,541	$2,300	70%	+$69
	Total deployed			11,500	$8,263	$11,500	—	+$555
	Cash reserve				$1,737	—	—	—

Risk profile

Worst case (all five lose, joint probability ~0.001%): −$8,263.
Best case (all five win): max payout $11,500 minus $8,263 cost = +$3,237 (+39.2%).
Most-likely outcome (4 of 5 win, modeled): around +$1,200 net, since the lone loss is most plausibly Knesset or Senate reconciliation.
Blended edge: $555 EV on $8,263 deployed = +6.7% on capital at risk (over a 6-week horizon).
Concentration: Two picks (Patel, Hegseth) are position-holder stability bets on the same administration — correlated tail if Trump pulls a sudden cabinet purge. Two are legislative timing bets (Senate recon, Knesset dissolution) — uncorrelated. One (Hormuz) is conditioned on the inverse of the Iran deal; if a deal lands fast it goes against me, but the Hormuz pick is the natural hedge to not being long Iran-deal markets directly.

Execution notes

Order type: Resting limit orders at the listed prices. Do not market-cross beyond 1¢ above limit for Patel/Hegseth, or 2¢ for SenateRec/Knesset/Hormuz.
Senate reconciliation: Top of book at 0.60 is thin (52 contracts). Stagger entries 0.60 / 0.61 / 0.62. If price ticks up to 0.65+ on news of a successful cloture vote, stop adding; the trade is in.
Knesset: Watch June 1 first-reading vote — that is the binary trigger. If first reading fails or is postponed past June 8, exit at-cost. If first reading passes 70+ Yea, add up to reserve.
Hormuz: Watch the Trump — Iran Supreme Leader sign-off cycle. A signed MOU is the only event that can move 7-day MA toward 60 in time. If a written deal is announced by June 7, consider trimming NO position by ~30%.
Patel / Hegseth: Set news alerts on Trump-Truth-Social posts mentioning either; both positions are decay trades, no add planned.
Invalidation: Patel pick invalidates if Trump publicly criticizes him. Hegseth invalidates if a Pentagon-operational disaster pushes the firing narrative. SenateRec invalidates if a third Republican defection lands. Knesset invalidates if a haredi-draft compromise is announced before first reading. Hormuz invalidates if PortWatch prints ≥30 transits/day before June 14.

5. What I rejected and why

Ticker	Reason for reject
KXDNCAUTOPSY-26-JUN01	Looked great on paper — DNC chair Ken Martin physically released a 192-page autopsy on May 21 (CNN, NBC, CBS, PBS) — the market last-traded 0.99 and the orderbook is empty. The market effectively settled YES once Kalshi confirmed the release; no entry available.
KXUSAIRANAGREEMENT-27-26JUL	The rules language reads "Iran-US nuclear deal" specifically. The deal under negotiation is a 60-day ceasefire MOU with Hormuz reopening; Iran has explicitly said nuclear talks come after the war is over, with current positions 5 vs 20 years apart on uranium moratorium. Pricing at 25¢ is approximately fair: the nuclear-specific resolution criterion is hard to meet, but a comprehensive package would qualify. No defensible edge after rules-risk adjustment.
KXLEAVESTARMER-26JUL01	97 Labour MPs publicly calling for resignation, Wes Streeting walked out of Cabinet, but Starmer publicly said he will contest any leadership challenge. The price drifted 0.35 → 0.20 over two weeks. The market has tracked the news well; the residual edge against a 15% true probability is too small versus political-event variance.
KXCRYPTOSTRUCTURE-26JAN-JUL	Senate Banking Committee advanced the Clarity Act 15–9 on May 14, but the bill still must merge with the Ag Committee version and clear the floor with the contested ethics provision. Sen. Gillibrand's public timeline is first week of August; the White House push is July 4. 10¢ is consistent with a roughly 1-in-10 chance the floor + reconciliation with House versions clears by July 1.
KXMAMDANIEO-26MAY30-T0	Confirmed via reviewmamdani.com and NYC Mayor's office: the only May 2026 EO on the books is the May 20 FIFA Parks emergency order, which the rules explicitly exclude. With 2 days remaining (May 29–30), 14¢ is roughly the base rate for a surprise mid-week non-emergency signing.
KXNEWTARIFFS-26MAY-JUN01	Rules require an executive action signed in May. The Feb 2026 Section 122 EO was struck down by the CIT on May 7; Trump's May 7 EU threat was a Truth Social post, not an EO. With four days left, 5¢ is appropriate — edge after spread is sub-1¢.
KXHORMUZNORM-26MAR17-B260615	Same mechanic as the July market, but 15 days less to ramp. Correctly priced near zero (8¢).
KXHORMUZWEEKLY-26MAY31-T50	Sums of transits for the week May 25–31 are essentially determined by AIS data already in flight; trade has no informational edge unless you have a faster pipe to PortWatch.
KXTRUMPACT-26MAY24-T1	Effectively resolved YES already (94/97 bid/ask). The 3¢ spread eats the edge.
KXEOWEEK-26MAY30-2	Counting-bucket market with no diligence advantage over a refresh of whitehouse.gov.
KXTRUTHSOCIAL-26MAY30-B189	5¢ spread, narrow bucket (180–199 posts), no edge.
KXTRUMPPHOTO-26MAY31	Resolves on a Getty-Images metadata count. Operational risk > analytical edge.
KXVOTEHUBTRUMPUPDOWN-26MAY28, KXAPRPOTUS-26MAY29-* (4 strikes)	Daily approval-tracker contracts; close within 24h. Spreads are inside-the-bucket and quotes change with each polling update.
KXUSAIRANAGREEMENT-27-26JUN	Same rules as the July contract but closes June 1 — functionally already at zero (7¢).

6. Sources

Iran — US deal & Strait of Hormuz

Israeli Knesset dissolution

Senate reconciliation (ICE/CBP)

Hegseth & Patel

DNC autopsy

Starmer leadership crisis

Tariffs & Mamdani EOs

Kalshi market endpoints used

GET /trade-api/v2/markets/{ticker} — quote snapshot
GET /trade-api/v2/markets/{ticker}/orderbook — depth-of-book
GET /trade-api/v2/series?category=Politics — politics series universe

Data sources. Snapshots and rules text from a local mirror of Kalshi trading_markets and market_snapshots (updated minutes-fresh through 2026-05-27 21:27 UTC). Live quotes and order-book depth from the Kalshi public API at api.elections.kalshi.com/trade-api/v2. News diligence from primary press sources cited inline.

Disclaimer. Probabilities in this report are subjective estimates by the author, not market consensus. Kalshi contracts resolve to $1 or $0; an unfavorable resolution means the position is worth zero. Past price movement is not a guarantee of future resolution. This is not investment advice; the audit is research output of a publicly archived workflow. Trade only with capital you can afford to lose.