Kalshi Politics — Mispricing Audit (Sentinel, managed)
1. How this was researched
Mode: category-match. trading_events.category = 'Politics' matched 352 active markets across 143 events closing within 45 days on the live Kalshi mirror (a theme-match fallback was not needed). Stage-1 mechanical screens cut 335: 271 below the 1,500-contract 24h-volume floor, 36 announcer-noise markets (Truth-Social-post counts, "who will Trump talk to", press-briefing counts), 14 fully priced (≥95¢/≤5¢), 12 already live picks in the feed (excluded up front per the duplicate rule, incl. KXHORMUZWEEKLY-26JUL26-T40, KXHEGSETHOUT-26APR-AUG01, KXKASHOUT-26APR-AUG01), and 2 on spread. The 17 survivors collapsed into 13 diligenced candidates after treating ladder legs of one event as a single thesis.
Each candidate got: rules text from the mirror, a 14-day daily price history from the Kalshi candlesticks API, a live orderbook snapshot at pick time, and primary-source news diligence (five parallel research passes). Two datasets did heavy lifting: the IMF PortWatch daily chokepoint feed (the actual resolver for all Hormuz markets — pulled directly from the PortWatch ArcGIS service) and RealClearPolitics' own backend JSON for the approval average and its daily history. Every pick's probability is a forecast of the named resolver's verdict at resolution time, with resolver risks priced as explicit point deductions (Stage 2.5).
2. Markets reviewed
| Ticker | Question | YES bid/ask | 24h vol | Verdict |
|---|---|---|---|---|
| KXHORMUZNORM-26MAR17-B260901 | Hormuz 7-day avg >60/day before Sep 1 | 8/9 | 56,478 | PICK — BUY NO |
| KXAPRPOTUS-26JUL31-40.2 | RCP approval below 40.2 on Jul 31 | 6/7 | 7,083 | PICK — BUY NO |
| KXCLARITYVOTE-26JUL-AUG08 | Senate recorded vote on CLARITY Act by Aug 8 | 59/61 | 10,374 | PICK — BUY YES |
| KXHEGSETHOUT-26APR-SEP01 | Hegseth out as SecDef before Sep 1 | 8/8 | 3,822 | PICK — BUY NO |
| KXHORMUZWEEKLY-26JUL26-T30 | >30 Hormuz transit calls Jul 20–26 | 88/89 | 5,090 | REJECT — resolver blind |
| KXHORMUZWEEKLY-26JUL26-T50 | >50 Hormuz transit calls Jul 20–26 | 14/15 | 14,910 | REJECT — resolver blind |
| KXHORMUZPEAK-26JUL26-T10 | Peak single day >10, Jul 20–26 | 65/70 | 1,665 | REJECT — resolver blind + spread |
| KXTRUMPNUMSTATES-26AUG01-E10 | Exactly 10 distinct states in July | 71/73 | 21,328 | REJECT — fairly priced |
| KXAPRPOTUS-26JUL31-40.9 | RCP approval 40.8–41.0 on Jul 31 | 31/32 | 3,091 | REJECT — coin-flip band |
| KXMAMDANIEO-26AUG01-T0 | Mamdani non-emergency EO this week | 12/13 | 3,025 | REJECT — tail band (edge logged) |
| KXLAKECONF-26MAY12-SEP01 | Kari Lake confirmed before Sep 1 | 5/8 | 2,196 | REJECT — tail band (edge logged) |
| KXPARDONSTRUMP-26JUL-17 | 10–24 people pardoned in July | 91/92 | 2,225 | REJECT — no edge + definitional |
| KXELECTIONEMERGENCY-26SEP01 | Election-emergency EO before Sep 1 | 10/11 | 1,927 | REJECT — fairly priced |
| KXTRUMPUFC-26AUG-DJT | Trump attends UFC 330 | 14/15 | 2,000 | REJECT — tail band, fair |
3. Picks — detail and thesis
Pick 1 — KXHORMUZNORM-26MAR17-B260901 · BUY NO @ 0.92 · HIGH CONVICTION
Will the 7-day moving average of Strait of Hormuz transit calls (IMF PortWatch) be above 60 before September 1, 2026?
Mispricing thesis. The market pays 8–9¢ for a recovery that has a physical floor under it. The resolver needs the PortWatch 7-day average to exceed 60 transit calls/day at some point before Sep 1. PortWatch is printing 6–17/day (its last seven prints, through Jul 19, sum to 85 — an average of ~12/day). Even the best post-crisis stretch — the late-June Islamabad-Memorandum ceasefire — peaked at a 7-day average of ~32/day, barely half the threshold. To resolve YES, a durable deal must be signed almost immediately, both the Iranian and US blockades lifted, mines swept, war-risk insurance repriced from 3–10% of hull value back toward 0.25%, and the world fleet must return — all by ~Aug 24 so a qualifying 7-day window can complete. Insurers are on record that this takes months.
Evidence.
- IMF PortWatch daily series (chokepoint6, pulled from the PortWatch ArcGIS API 2026-07-27): Jul 13–19 prints of 9, 11, 12, 10, 11, 17, 15 — 7-day average ~12/day vs the 60 threshold and a ~96/day 2024 baseline.
- Lloyd's Market Association: safety concerns mean "it will take months for some sort of normality to return" even after a deal (mine clearance, navigational-safety cooperation, port services).
- War-risk premiums surged again mid-July to 3–10% of hull value (The National, Jul 17) — a $3–10M cost per $100M tanker transit that reprices only after a durable settlement.
- Four ceasefires have collapsed since April; Iran struck commercial ships Jul 8; Oman-mediated talks called "productive" Jul 26 but Iran's own foreign ministry said "no change" in maritime traffic status (AFP/Manila Times, Jul 26).
- Price history: YES has drifted 14¢ → 8¢ over two weeks on heavy volume (50–70k/day) — no 48h thesis-eating move; this is a persistent structural overbid on the tail, likely lottery-ticket demand.
Resolver profile (Stage 2.5). Resolver: IMF PortWatch 7-day moving average, resolving YES on any qualifying print before Sep 1 — a first-occurrence mechanism, so the NO side must survive every print for 5 weeks. Priced risks: −2 pts (PortWatch data revision or counting artifact spiking a weekly average). Evidence-based P(NO) ≈ 98 − 2 = 96.
Tail risks. Cleanest loss: a comprehensive US–Iran deal within ~2 weeks followed by an unprecedentedly fast fleet return, or a PortWatch data artifact. Note the market resolves on data prints, not peace headlines — a deal alone does not flip it.
Liquidity/entry. yes_bid 8 / yes_ask 9; NO fillable at 92¢ against 3,043 contracts at top of book; 24h volume 56,478; OI 854,333. Deepest book in the category.
Pick 2 — KXAPRPOTUS-26JUL31-40.2 · BUY NO @ 0.94 · HIGH CONVICTION
Will Trump's approval be below 40.2 at 11:00 AM ET on July 31, 2026, per RealClearPolitics?
Mispricing thesis. The RCP average is 40.9 today (verified three ways, including RCP's own backend JSON, poll window 7/6–7/26). Resolving YES requires a fall of ≥0.7 points in four days. RCP's own daily series shows a mean absolute daily move of 0.11 points; over the last 180 days only one day moved ≥0.5 (max 0.6) and typical 4-day drift is 0.2–0.4. And the single most likely composition change before Friday — Pew's 34% (fielded 7/6–12) aging out of the window — mechanically moves the average up 0.3–0.5. The 6¢ YES bid is Iran-war-headline demand ("string of polls below 40" — Forbes, Jul 27) paying for a move the average's arithmetic can't plausibly deliver.
Evidence.
- RCP average 40.9 / disapprove 57.5 as of Jul 27 — confirmed via a fresh Wayback capture of the live page and RCP's historical-data JSON (poll ID 8656); mean of the 14 constituent polls is 40.93.
- Daily trajectory: 40.3 (Jul 6) → 41.1–41.2 plateau (Jul 14–22) → 40.9 (Jul 26–27) after CBS's 39% entered. The series has not moved 0.7 in four days at any point in the last six months.
- Composition: worst poll in the window (Pew, 34%) is oldest and nearest to dropping; expected entries (Economist/YouGov ~40–41, Rasmussen 43) are neutral-to-positive for the average.
Resolver profile (Stage 2.5). Resolver: the RealClearPolitics average, snapshot at exactly 11:00 AM ET Jul 31 — a snapshot mechanism (the genre that produced this program's costliest v1 loss, so it was priced deliberately). What can change the snapshot: which polls sit in the trailing window at that instant and any new entries. Priced risks: −1 pt (bulk poll-window turnover / RCP methodology quirk), −1 pt (shock event dumping several instant polls at 37–38 before Friday). Evidence-based P(NO) ≈ 99 − 2 = 97.
Tail risks. Cleanest loss: a catastrophic news shock in the next 96 hours (major war escalation with US casualties) producing multiple overnight polls in the 37s and RCP ingesting them before 11 AM Friday.
Liquidity/entry. yes_bid 6 / yes_ask 7; NO fillable at 94¢ against 3,414 contracts; 24h volume 7,083; OI 16,411. Market opened Jul 25; YES ticked 4¢ → 7¢ — no adverse 48h move against the NO side beyond 3¢ of tail demand.
Pick 3 — KXCLARITYVOTE-26JUL-AUG08 · BUY YES @ 0.61 · MEDIUM CONVICTION
Will the Senate conduct any recorded vote on the CLARITY Act before Aug 8, 2026?
Mispricing thesis. This is a rules-vs-headline gap — the crowd is pricing the bill's troubles, but the contract pays on any recorded vote, and the rules explicitly count a cloture vote on the motion to proceed, even one that fails. Thune's Jul 23 comments ("I don't think we'll be able to get them done… I would like to at least get Clarity started. We'll see where the votes are") cratered this market from 73¢ to 39¢ — but he ruled out passage, not floor action. Punchbowl's week-of-Jul-27 floor lookahead states a crypto market-structure "procedural vote [is] expected regardless of Democratic agreement on ethics restraints." A failed cloture vote resolves this YES.
Evidence.
- Rules text (mirror, verified): cloture on a motion to proceed does satisfy the payout criterion; committee votes and voice votes do not.
- Punchbowl News "Final countdown" (week of Jul 27): procedural vote expected regardless of an ethics deal. CNBC via Coingape (Jul 25): Thune plans to force a vote to put every senator on record even without the 60.
- Bill is on the Senate Legislative Calendar (No. 423) — reported by Banking 15–9 (May 14) and Agriculture 12–11 (Jan 29); merged draft updated Jul 22 now includes an ethics provision (CoinDesk, Jul 26).
- Roughly 9 session days remain before the recess (last day ~Aug 7); CoinDesk's Jul 26 timeline has an MTP early this week with cloture votes the week of Aug 3.
- Price history: 73¢ (Jul 23) → 39¢ (Jul 25) → 61¢ (Jul 27) — violent whipsaw on the Thune headlines; part of the recovery has eaten the easy edge, which is why this is MEDIUM, not HIGH.
Resolver profile (Stage 2.5). Resolver: occurrence of a qualifying recorded vote before Aug 8 — an unambiguous, publicly observable mechanism (Senate roll-call record); definitional boundaries are unusually well-specified in the rules. Priced risks: −3 pts (floor congestion — Russia sanctions vehicle, CR, nomination packages — lets leadership punt to September if the ethics deal collapses by ~Jul 30), −2 pts (no cloture motion on CLARITY actually filed as of Jul 27). Evidence-based P ≈ 70 − 5 = 65.
Tail risks. Cleanest loss: ethics talks collapse this week and Thune quietly shelves the MTP rather than burn two floor days on a doomed cloture vote — his "we'll see where the votes are" is a ready off-ramp.
Liquidity/entry. yes_bid 59 / yes_ask 61; 287 contracts fillable at 61¢; 24h volume 10,374; OI 48,813. Related exposure note: the live feed already carries NO on the same bill becoming law (KXCRYPTOSTRUCTURE, prior runs) — that pairing is coherent (vote happens, bill still fails), but readers should know both ride crypto-legislation news.
Pick 4 — KXHEGSETHOUT-26APR-SEP01 · BUY NO @ 0.92 · MEDIUM CONVICTION
Will Pete Hegseth be out as Secretary of Defense before Sep 1, 2026?
Mispricing thesis. Personnel-departure markets structurally overprice exits, and this one carries 8% for a 5-week window in which every observable is anti-departure: Hegseth testified to Congress on Jul 21 running the Iran war's $67B supplemental request, announced a new force-wide policy Jul 15, and published a "warriors not bureaucrats" piece Jul 21. There is no July reporting of Trump wavering, no successor shortlist, no investigation at a decision point. Wartime secretaries mid-funding-fight don't get quietly swapped in August.
Evidence.
- Jul 21: testified on Iran war costs ($37.5B to date, $67B requested) — CNN/NBC, Jul 21.
- Jul 15: announced troop testosterone-screening policy — routine policymaking, not exit posture.
- Democratic resignation demands (CT delegation, Rep. Lieu) have persisted for months without traction; Trump's support has consistently insulated him through earlier scandals (Signal-app, officer purges).
- Price history: YES stable 6–11¢ for two weeks, 8¢ now — no 48h move; the feed's existing Aug 1 leg sits at 1¢, confirming nothing is imminent.
Resolver profile (Stage 2.5). Resolver: formal, permanent vacation of the office before Sep 1 (early-close market). Rules are tight: temporary leaves, suspensions, recusals do not count — which protects NO against a "Hegseth sidelined" headline resolving against us. Death clause resolves at last fair price (roughly neutral). Priced risks: −1 pt (abrupt Trump firing in a volatile administration). Evidence-based P(NO) ≈ 97 − 1 = 96.
Tail risks. Cleanest loss: Trump fires him over a new scandal or an Iran-war setback with zero advance reporting — the only live path, and inherently unforecastable.
Liquidity/entry. yes_bid 8 / yes_ask 8 (1¢-tight book); NO fillable at 92¢ against ~323 contracts at top of book, 3,000+ within a cent; 24h volume 3,822; OI 93,974. Cluster note: the live feed already holds NO on the Aug 1 leg of this same event from a prior run — same underlying thesis, so this run keeps the new leg at MEDIUM size ($70, 7%) rather than stacking it.
4. Recommended $1,000 portfolio
Sizing is set by conviction tier + entry band only (HIGH ≤ $150/pick, MEDIUM ≤ $70/pick, 15% per-cluster cap). EV columns are recorded for calibration and did not drive contract counts — the resolved v1/v2 record showed stated EV was anti-predictive.
| # | Ticker | Side | Limit | Conviction / band | Contracts | Cost | Max payout | Edge ¢ | EV % |
|---|---|---|---|---|---|---|---|---|---|
| 1 | KXHORMUZNORM-26MAR17-B260901 | NO | 92¢ | HIGH / >90¢ | 150 | $138.00 | $150.00 | +4 | 4.3 |
| 2 | KXAPRPOTUS-26JUL31-40.2 | NO | 94¢ | HIGH / >90¢ | 120 | $112.80 | $120.00 | +3 | 3.2 |
| 3 | KXCLARITYVOTE-26JUL-AUG08 | YES | 61¢ | MEDIUM / 60–90¢ | 114 | $69.54 | $114.00 | +4 | 6.6 |
| 4 | KXHEGSETHOUT-26APR-SEP01 | NO | 92¢ | MEDIUM / >90¢ | 76 | $69.92 | $76.00 | +4 | 4.3 |
| Total deployed | $390.26 | $460.00 | — | 4.4 blended | |||||
| Cash held (cash is a position) | $609.74 (61%) | Expected dollar edge ≈ +$17.20 | |||||||
Cluster exposure (cap: 15% of capital = $150 per cluster)
| Cluster | Picks | Cost | % of capital | Cap |
|---|---|---|---|---|
| hormuz-recovery | #1 | $138.00 | 13.8% | 15% |
| trump-approval-rcp | #2 | $112.80 | 11.3% | 15% |
| crypto-legislation | #3 | $69.54 | 7.0% | 15% |
| hegseth-tenure | #4 | $69.92 | 7.0% | 15% |
The Hormuz Jul 20–26 weekly markets were rejected outright, so hormuz-recovery holds only the Sep-1 normalization leg — no correlated Hormuz double-bet. Clusters #3 and #4 each overlap a thesis already live in the feed from prior runs (crypto-law NO; Hegseth Aug-1 NO); both were deliberately kept at MEDIUM size.
Conviction exposure
| Tier | Picks | Cost deployed | % of deployed |
|---|---|---|---|
| HIGH | 2 | $250.80 | 64% |
| MEDIUM | 2 | $139.46 | 36% |
| LOW | 0 | $0 (never deploys, v3.3) | 0% |
Risk profile
- Worst case (all four lose — requires a near-immediate Hormuz normalization, an unprecedented 4-day approval collapse, a shelved CLARITY vote, and a Hegseth exit, essentially independent events): −$390.26. No single cluster can flip the run's sign: largest single-pick loss is −$138.
- Best case (all four win): +$69.74.
- Most likely outcome: the three favorites (jointly ~89%) win and CLARITY (65%) decides the run — all-win probability ≈ 58% → +$69.74; CLARITY-only loss ≈ 31% → −$44.26. Expected P&L ≈ +$17.
- Concentration: four genuinely independent theses (shipping recovery, poll arithmetic, Senate floor procedure, cabinet tenure). The two deep favorites are short-tail exposure to a common macro shock (a catastrophic Iran-war turn could simultaneously hurt #2 and delay #3) — this is the book's one soft correlation, and it is why $610 stays in cash.
Execution notes
- All four are limit orders at the quoted price; top-of-book depth covers every position (3,043 / 3,414 / 287 / 323 contracts at limit) with zero expected slippage. Do not chase: if CLARITY gaps above 65¢ on a cloture filing, the edge is gone.
- Watchlist triggers: a cloture motion on CLARITY filed this week → thesis confirming, hold; ethics-deal collapse reported without an MTP by Thu Jul 30 → thesis degrading, exit at market. A signed US–Iran agreement → re-check #1's PortWatch prints weekly (a deal alone does not resolve it). Any single approval poll ≤37 before Thursday → re-check #2's arithmetic against the live constituent-poll table.
- Invalidators: #1 — PortWatch prints a day >45 (recovery faster than any precedent); #2 — RCP average ≤40.5 by Wed Jul 29; #3 — Punchbowl reports market-structure floor time slipping to September; #4 — any primary-source report of a Hegseth resignation/firing decision.
- Reserve: $609.74 (61%) held as cash — an efficient-category week; padding the book with the coin-flips below would have repeated exactly the pattern that lost money in v1/v2.
5. What I rejected and why
All ten Stage-2 survivors below are machine-logged in picks.json and shadow-tracked to settlement — if the rejects outperform the picks, the screen adds nothing and we want to know. Three cuts came from the Stage-3.5 entry-band screen; note the discipline cost real modeled edge on Mamdani and Lake.
| Ticker | Would-be side @ price | My prob | Reject reason |
|---|---|---|---|
| KXHORMUZWEEKLY-26JUL26-T30 | YES @ 89¢ | 85 | Resolver blind. PortWatch's last daily print is Jul 19 — the entire Jul 20–26 resolution window is unpublished (8-day lag), and PortWatch (10–17/day through Jul 19, no downtrend) diverges sharply from Lloyd's/NBC trackers showing a collapse to ~1 vessel/day. Modeled edge negative at 89¢. Stage-2.5 deductions exceed the ~15-pt cap. |
| KXHORMUZWEEKLY-26JUL26-T50 | NO @ 86¢ | 82 | Same blind window; my scenario range for the PortWatch total (≈35–55) spans the threshold. This exact resolver produced the v3.2 tail loss (printed 28 vs a tracker's 51). Fair-priced; no defensible edge. |
| KXHORMUZPEAK-26JUL26-T10 | YES @ 70¢ | 72 | Best statistical case of the family (needs one day >10; Jul 18–19 printed 17 and 15 with no new shock at the boundary) — but the same unpublished-window problem, a 5¢ spread, and a 2.8k-OI book. Entry-band screen note: survives the band but fails Stage 2.5's resolver-deduction cap. |
| KXTRUMPNUMSTATES-26AUG01-E10 | YES @ 73¢ | 72 | Fairly priced. Verified count: 8 distinct states through Jul 26; Michigan today makes 9; announced Jul 31 Camp David (MD) cabinet meeting makes 10. But the split hinges on whether Andrews AFB transits count as Maryland under VISITAREA rules, and Camp David already cancelled once (May 26). No edge at 73¢. |
| KXAPRPOTUS-26JUL31-40.9 | YES @ 32¢ | 30 | Entry-band screen. Genuine coin flip between the two middle bands (average 40.9 now, estimate ~41.0 Friday, Pew-dropout skews up). Coin-flip/tail pricing without HIGH conviction and ≥15¢ edge is a mandated reject — this is the band that hit ~33% historically. |
| KXMAMDANIEO-26AUG01-T0 | YES @ 13¢ | 25 | Entry-band screen — sub-35¢ tail, hard reject (v3.2), no exceptions. Logged loudly: modeled +12 pts of edge (empirical non-emergency-EO weekly hit rate ≈28%; he signed EOs Jul 20 and Jul 24). The shadow track will tell us what this discipline costs. |
| KXLAKECONF-26MAY12-SEP01 | YES @ 8¢ | 35 | Entry-band screen — sub-35¢ tail, hard reject (v3.2). The largest modeled edge in the audit: reported out of SFRC 12–10 on Jul 22 after Cornyn's PEPFAR deal, and pre-recess en bloc packages have historically swept in dozens of calendar ambassadors. Prime shadow-track candidate for the reinstatement argument. |
| KXPARDONSTRUMP-26JUL-17 | YES @ 92¢ | 89 | No edge (model 89 < price 92) plus an unpriceable definitional trap: DOJ's list shows 17 July-3 grants including corporate entities vs 11 natural persons — whether companies count as "persons," and a Friday-Jul-31 news-dump batch, could each flip the 10–24 band. |
| KXELECTIONEMERGENCY-26SEP01 | NO @ 90¢ | 91 | Roughly fair. The activist draft EO is real and Trump's Jul 16 election-security speech tracked its framing, but his announced path is legislative (SAVE America Act) and he publicly denied emergency plans; ~1¢ of edge is not deployable. |
| KXTRUMPUFC-26AUG-DJT | YES @ 15¢ | 16 | Entry-band screen (tail) and fairly priced anyway. ~23% base rate at numbered PPVs, Philadelphia fits his August geography, but he skipped the far bigger McGregor card Jul 11 and no attendance reporting exists. |
6. Sources
- IMF PortWatch daily chokepoint feed (resolver data, pulled 2026-07-27): portwatch.imf.org chokepoint6 via the Daily_Chokepoints_Data ArcGIS service
- RealClearPolitics approval average + daily history: RCP historical_data.json (poll 8656); live-page Wayback capture, Jul 27; Forbes, Jul 27
- CLARITY Act: Punchbowl — Thune on Clarity, Jul 23; Punchbowl — Final countdown; CoinDesk, Jul 26; Coingape/CNBC, Jul 25; Roll Call, May 15; The Hill — pre-recess floor agenda
- Hormuz situation: CNBC, Jul 21; Lloyd's Market Association; The National, Jul 17; AFP/Manila Times, Jul 26; NBC Hormuz tracker
- Hegseth: CNN, Jul 21 (war-funding testimony); NBC, Jul 21
- Trump July travel (reject diligence): 2026 presidential trip list; Roll Call Factba.se calendar; Gray TV Week Ahead, Jul 26; GPB, Jul 23
- Mamdani EOs (reject diligence): ReviewMamdani EO tracker; PoliticsNY, Jul 24; PIX11, Jul 20
- Kari Lake (reject diligence): The Hill, Jul 22; NOTUS
- Pardons (reject diligence): DOJ Office of the Pardon Attorney clemency list; The Hill, Jul 3
- Election emergency (reject diligence): Democracy Docket — draft EO; FactCheck.org on the Jul 16 speech
- UFC 330 (reject diligence): UFC.com; TKO announcement
- Market data: Kalshi read-only DB mirror (schema-verified) and Kalshi public trade API v2 (markets, orderbooks, candlesticks), all fetched 2026-07-27.
Data sources: Kalshi live mirror (read-only SQL), Kalshi public API v2 (live orderbooks and candlesticks at pick time), IMF PortWatch ArcGIS feed, RealClearPolitics backend JSON, and the primary-source reporting linked above. All probabilities are subjective estimates by the auditing model (v3.3 methodology); prediction-market contracts can and do resolve to zero, and losing the entire stake on any pick is a normal outcome. Prices move — the entry context recorded per pick is the honest baseline for judging fills. This report is part of a public performance track record; picks are cleared for auto-copy and rejects are shadow-tracked to settlement. Nothing here is financial advice.