Kalshi Politics — Mispricing Audit

Report date 2026-07-02 · Horizon 45 days · Capital $10,000 · Methodology v3 (conviction-weighted, entry-band screened, EV-agnostic sizing, 15% cluster cap) · Picks count toward the public track record and are cleared for auto-copy.

Bottom line: zero picks this run — the correct book is 100% cash ($10,000 held). Politics is heavily picked-over this week: 84 contracts are already live picks in the feed and were excluded up front, and they account for most of the category's liquid inventory. Of 290 active markets in the window, 270 failed mechanical screens (volume, spread, fully-priced), and all 8 candidates that survived Stage-2 diligence failed either the edge test or the v3 conviction/entry-band screen. Under v3 rules, padding the book with mid-band leans is exactly what lost money in the resolved v1/v2 record. All 8 rejects are machine-logged with my probability estimates and will be shadow-tracked to settlement — if they outperform, the screen cost money and that finding will be visible.

1. How this was researched

Mode: category-match. trading_events.category = 'Politics' matched 290 active markets closing within 45 days (by 2026-08-16). No theme-keyword fallback was needed.
Stage 1 mechanical screen (latest snapshot per market, cross-checked against the live Kalshi API): cut 194 for volume24h < 1,500; 54 as fully priced (YES bid ≥ 95¢ or ask ≤ 5¢); 4 for spread > 5¢; 20 as already-published picks. Survivors: 5. Three KXPERSONPUBLIC markets at volume 1,328–1,465 (1¢–3¢ spreads, opened Jul 1) were carried into Stage 2 as flagged borderline exceptions — and all three were ultimately rejected anyway, so no sub-floor market received capital.
Stage 2 diligence on all 8 candidates: resolution rules from the mirror, 14-day intraday price history from market_snapshots, live top-of-book from the Kalshi public API, and primary-source news (Senate schedule reporting, IMF PortWatch's ArcGIS data service queried directly for daily Hormuz transit counts, the Federal Register API for EO signing dates, congressional floor calendars).
Stage 3.5 v3 screen: every surviving candidate was assigned a conviction tier (off source quality + rules clarity + book depth, never off EV) and an effective entry band. Coin-flips (35–60¢) require HIGH conviction plus ≥15¢ edge; sub-35¢ tails default-reject. Sizing, had anything survived, would have been tier-capped (15%/7%/3%) with a 15% per-cluster ceiling.

2. Markets reviewed

Ticker	Market	YES bid/ask	Side considered	My prob	Entry band	Verdict
KXCLAYTONCONF-26JUN11-AUG08	Clayton confirmed DNI before Aug 8	69/74	YES @ 74	72%	Favorite (60–90¢)	REJECT — edge eaten by 48h move
KXHFHOUSING-27-JUL4	Housing bill law before Jul 4	7/10	NO @ 93	88%	Deep favorite (>90¢)	REJECT — negative edge
KXHORMUZWEEKLY-26JUL05-T225	>225 Hormuz transits Jun 29–Jul 5	39/42	YES @ 42	49%	Coin-flip (35–60¢)	REJECT — band screen
KXHORMUZWEEKLY-26JUL05-T250	>250 Hormuz transits Jun 29–Jul 5	14/16	YES @ 16	27%	Tail (<35¢)	REJECT — band screen
KXTRUMPENDORSEMENTS-26JUL04-A25	≥25 Trump endorsements this week	18/24	NO @ 82	—	Favorite (60–90¢)	REJECT — unverifiable count
KXPERSONPUBLIC-26AUG01-HCLI	Hillary Clinton seen in public in July	57/58	YES @ 58	85%	Coin-flip (35–60¢)	REJECT — band screen
KXPERSONPUBLIC-26AUG01-BCLI	Bill Clinton seen in public in July	45/48	YES @ 48	78%	Coin-flip (35–60¢)	REJECT — band screen
KXPERSONPUBLIC-26AUG01-JBID	Joe Biden seen in public in July	47/53	YES @ 53	80%	Coin-flip (35–60¢)	REJECT — band screen

The only liquid spread-cut market was KXAPRPOTUS-26JUL03-40.6 (48/56, 8¢ spread; adjacent rungs are already feed picks). The largest fully-priced skips (e.g. KX14AMENDCASE-26-AUG at 1¢, KXFABLERESTORE-27-26JUL03 at 95/99) carry no deployable edge by construction.

3. Top picks

No picks were deployed. 100% CASH
This is a v3 outcome, not a failure mode: the methodology says a near-empty book in an efficient week is the correct answer. Three candidates carried apparent statistical edge (the PERSONPUBLIC trio, my probabilities 78–85% vs prices 48–58¢) but sit in the 35–60¢ coin-flip band at MEDIUM conviction — the band+tier combination that produced the losses v3 exists to stop. The favorites with clean rules (Clayton, the housing-bill deadline) are priced at or above my estimates after large, news-driven repricings in the last 48 hours. I will not defend a dollar I can't defend; there is nothing here I can.

4. Recommended $10,000 portfolio

Position	Conviction	Entry band	Contracts	Cost	Max payout
Cash reserve	CASH	—	—	$10,000	$10,000
Total deployed				$0 (0%)	—

Cluster exposure (cap: 15% of capital per cluster)

Cluster	Cost	% of capital	Cap
— (no clusters funded)	$0	0%	15%

Conviction exposure

Tier	Cost deployed	Per-pick cap
HIGH	$0	$1,500
MEDIUM	$0	$700
LOW	$0	$300

Risk profile: worst case $0 lost, best case $0 gained, most-likely outcome $10,000 preserved. Concentration: none.
Blended EV: 0% by construction (EV figures on rejects are recorded for calibration only and did not drive sizing — per v3, EV never drives sizing).

Execution notes & watchlist triggers

KXPERSONPUBLIC-26AUG01-HCLI / -BCLI / -JBID — the trio converts to deployable HIGH-conviction favorites if a published, dated July appearance surfaces for any of the three (a speaking engagement, a scheduled event, a confirmed sighting after Jul 1 10:00 AM ET that meets the rules). A confirmed post-window-open sighting makes the relevant market mechanically resolved — buy YES up to 90¢ at that point if the market lags the news. Watch for: Clinton Foundation announcements, Biden memoir/press events, Hamptons photo wires.
KXHFHOUSING-27 later legs — the 10-day presentment clock on the ROAD to Housing Act (passed Jun 22–23) expires around Jul 6–7, at which point it becomes law by signature or by default (Congress returns Jul 13, so no pocket-veto window). The Jul-7 and later legs are already feed picks; no new leg is cheap enough to add.
KXEOWEEK-26JUL04-0 (sub-floor volume, 39/40¢) — "Trump signs >0 EOs this week" at 40¢ is a watchlist curiosity: the Federal Register shows no EO signed since Jun 25, but publication lags signing by 3–5 days. If whitehouse.gov posts any EO dated Jun 28–Jul 4, this becomes a mechanically-won contract at 40¢. Not deployable this run (volume 1,258 < 1,500 floor).
Hormuz weekly ladder — PortWatch publishes with a ~4-day lag; the Jun 29–Jul 2 daily prints land Jul 3–6. If the first window prints come in ≥40/day, the T250 YES thesis re-rates sharply; below 30/day, the whole ladder above T200 dies. Either way the next audit run should re-examine the following week's ladder with the new prints.

5. What I rejected and why

All eight Stage-2 survivors below are machine-logged in picks.json with the side I would have taken and my probability estimate where I formed one, and are shadow-tracked to settlement. If the rejects perform as well as picks historically did, the selection screen adds nothing — that is a testable claim, and the three PERSONPUBLIC rejects are the sharpest test of the v3 band screen in this run.

KXPERSONPUBLIC-26AUG01-HCLI — Hillary Clinton seen in public in July · would have been BUY YES @ 58¢ · my prob 85% vs market 58%

Cut by the Stage-3.5 entry-band screen: coin-flip band (35–60¢), conviction MEDIUM, HIGH required.

She is by all public reporting healthy and active; her "Hillary Clinton Live" tour runs this fall and the Clinton Global Initiative annual meeting is Sep 22–23 — but I found no published July engagement, which is exactly what separates MEDIUM from HIGH under v3.
Market opened Jul 1 at ~30¢ and climbed to 57/58 within a day on ~1,465 contracts — a thin, new book still finding its level. My 85% implies +27¢ of edge, the largest apparent edge in the run, in the band that historically hit ~33%.
Tail: the rules require a sighting after 10:00 AM Jul 1; a quiet Hamptons month with no wire photo is unlikely but not exotic. Entry context: 57/58, vol24 1,465 (marginally under the 1,500 floor), OI 1,465.

KXPERSONPUBLIC-26AUG01-JBID — Joe Biden seen in public in July · would have been BUY YES @ 53¢ · my prob 80% vs market 53%

Cut by the band screen: coin-flip band, conviction MEDIUM.

NBC News reported Biden undergoing radiation for metastatic prostate cancer; Jill Biden said Jun 1 he "will have cancer for the rest of his life" (ABC health timeline). Yet reporting through late May shows him publicly active through treatment — appearances, speeches, memoir work.
I could not establish the date of his last confirmed public sighting — a genuine hole in the evidence. The market's ~50¢ may encode recent invisibility I can't see from public sources. When I can't close that gap, the conviction ceiling is MEDIUM and the band screen governs.
Entry context: 47/53 (6¢ live spread — would also fail the spread screen at pick time), vol24 1,348, OI 946.

KXPERSONPUBLIC-26AUG01-BCLI — Bill Clinton seen in public in July · would have been BUY YES @ 48¢ · my prob 78% vs market 48%

Cut by the band screen: coin-flip band, conviction MEDIUM.

Seen in June at a New York book event — but visibly frail, stumbling on a sidewalk; he and Hillary were later photographed with what appeared to be a portable defibrillator, and he has a prior fever hospitalization.
A month out of public view for health reasons is a live scenario, not a tail — which is precisely why the market makes this a coin flip and why MEDIUM is the honest tier. Clustered with HCLI (the couple is frequently photographed together, so the sightings correlate).
Entry context: 45/48, vol24 1,329 (below floor), OI 1,329.

KXCLAYTONCONF-26JUN11-AUG08 — Clayton confirmed as DNI before Aug 8 · would have been BUY YES @ 74¢ · my prob 72% vs market 74%

Cut at Stage 3: the price already moved on the thesis in the last 48h — from 30¢ to 70¢.

The catalyst: a Jul 1 Washington Examiner report that the confirmation hearing is tentatively rescheduled for Jul 15, with Clayton "expected to be confirmed without issue." Recent DNI precedents (Gabbard: hearing Jan 30 2025 → confirmed Feb 12) make hearing-to-floor in ~2–3 weeks feasible, landing just before Aug 8.
But Trump already derailed this once — cancelling the June hearing to leverage the SAVE America Act, FISA 702, and a US-Attorney approval (NBC) — and the new date is explicitly "tentative." One more presidential whim slips this past the deadline.
My 72% sits at the 74¢ ask: no edge survives the repricing. Entry context: 69/74, vol24 1,589, OI 1,073.

KXHFHOUSING-27-JUL4 — housing bill becomes law before Jul 4 · would have been BUY NO @ 93¢ · my prob 88% vs market ~92%

Cut at Stage 3: negative edge after the thesis played out — the market collapsed 54¢→10¢ this week.

The 21st Century ROAD to Housing Act — which includes the institutional-investor single-family purchase ban that satisfies this market's rules (Mayer Brown) — passed the Senate 85–5 on Jun 22 and the House 358–32 on Jun 23 (CoinDesk, BPC summary). It sits on the President's desk; the question is purely whether he signs by end of Jul 3.
He has held it ~9 days, which reads as a staged moment — and his precedent is signing marquee bills on July 4 (OBBBA, 2025), which would resolve this leg NO but the feed's existing Jul-7 YES leg YES. The 7–10¢ YES price fairly brackets a Jul 2–3 surprise signing.
At 93¢ NO with an honest 88%, the edge is negative; and a same-day signing announcement is exactly the kind of tail that fills you before you can cancel. Entry context: 7/10, vol24 2,913, OI 8,290.

KXHORMUZWEEKLY-26JUL05-T225 — >225 Hormuz transit calls Jun 29–Jul 5 · would have been BUY YES @ 42¢ · my prob 49% vs market 42%

Cut by the band screen: coin-flip band, conviction nowhere near HIGH — the strike sits exactly on the run rate.

Primary data, queried directly from the IMF PortWatch ArcGIS service: daily transit calls collapsed to single digits during the 2026 Hormuz crisis, then after the US-Iran settlement: Jun 24 52, Jun 25 51, Jun 26 39, Jun 27 30, Jun 28 27 (last published print; ~4-day lag).
The Jun 24–25 burst reads as backlog clearing; the 3-day run rate is 32/day — and 32 × 7 = 224 vs a strike of 225. The market's 40¢ is about as efficient as a strike can be priced. The Jun 27 JMIC route-widening and Saudi export push argue for re-acceleration; four straight declining prints argue against.
Resolution data for the window itself publishes after the market closes — no one, including me, can know. Entry context: 39/42, vol24 1,718, OI 1,367.

KXHORMUZWEEKLY-26JUL05-T250 — >250 Hormuz transit calls Jun 29–Jul 5 · would have been BUY YES @ 16¢ · my prob 27% vs market 15%

Cut by the band screen: sub-35¢ tail, and I decline to spend the run's single lottery slot on it.

Same PortWatch data as T225. YES needs a sustained ≥36/day — above anything printed except the two backlog days. My 27% comes from scenario weights (plateau 45% / moderate re-ramp 35% / strong ramp 20%) that are honestly ±15 points; a "cheap tail" built on soft weights is the exact shape of the v1/v2 tail losses.
The declining prints since Jun 25 actively argue against the re-acceleration this contract needs. Entry context: 14/16, vol24 1,606, OI 1,107. Clustered with T225 (hormuz-reopening) — had both been picks, the 15% cluster cap would have bound them jointly.

KXTRUMPENDORSEMENTS-26JUL04-A25 — Trump endorses ≥25 people this week · would have been BUY NO @ 82¢ · no probability formed

Cut at Stage 2/3: the resolving quantity is unverifiable from public sources mid-week.

Trump has issued 300+ endorsements this cycle and does multi-state batch drops (six states in one late night), so a 25-endorsement week is entirely possible — but I cannot count this week's Truth Social endorsements from public sources with resolution-grade accuracy.
The tape shows traders counting in real time: intraday prints of 4→85→13→55→17–28 over three days. Trading against people with a live count and no count of my own is the definition of no edge. The 6¢ live spread would fail the screen anyway.
Entry context: 18/24, vol24 1,637, OI 3,006. No model_prob_pct logged — I declined to fabricate one.

6. Sources

Washington Examiner — Clayton hearing rescheduled for mid-July (Jul 1, 2026)
NBC News — Senate delays Clayton nomination after Trump post
CNBC — Trump sabotages Senate bid to fast-track Clayton as DNI
NPR — Trump names Jay Clayton DNI nominee
IMF PortWatch — daily Strait of Hormuz transit calls queried directly from the ArcGIS Daily_Chokepoints_Data feature service (prints through Jun 28, 2026)
Wikipedia — 2026 Strait of Hormuz crisis · straits.live tracker (JMIC route widening, Saudi export push)
CoinDesk — Senate passes housing bill Jun 22 (85–5); House followed Jun 23 (358–32)
Bipartisan Policy Center — Inside the final 21st Century ROAD to Housing Act
Mayer Brown — housing bill's institutional-investor purchase ban
House Majority Leader calendar — next House votes Jul 13 (July 4 district work period)
NBC News — Biden undergoing radiation therapy · ABC News — Biden health timeline
AOL — frail Bill Clinton sparks health fears at rare appearance · LiveNOW/Fox — Bill Clinton hospitalized for fever · Caliber — emergency-equipment sighting
Ensemble Arts Philly — Hillary Clinton Live (fall tour) · Clinton Foundation events (CGI Sep 22–23)
NPR — Trump endorsements in 2026 · Fox News — late-night endorsements in six states
Federal Register API — executive-order signing dates (latest signed Jun 25, 2026)
Kalshi read-only DB mirror (markets, events, 5-minute snapshots) and the Kalshi public trade API (live quotes, orderbooks)

Data: Kalshi DB mirror + Kalshi public API (quotes as of 2026-07-02 ~12:00 UTC), IMF PortWatch, Federal Register, and the cited press. All probabilities are subjective estimates by the auditing model; prediction-market contracts can and do resolve to zero. Rejects are logged and shadow-tracked to settlement; per v3 methodology, EV figures are recorded for calibration only and never drive position sizing. Nothing here is investment advice.