The Edge
The Fed Funds Rate contract on Kalshi is priced at 42c — but our Le (2026) recalibration model puts the true probability at 48%. That's a 6 percentage point gap.
Why This Matters
Political and economic prediction markets systematically compress prices toward 50%. The Le (2026) paper, analyzing 292M trades, quantifies this bias by contract horizon and category.
For the Fed Rate contract specifically, the calibration slope of 0.82 means the market is under-reacting to signals that point toward a rate cut. When calibrated probability exceeds market price by this margin, historical data suggests the market corrects within 2-4 weeks.
Also Notable This Week
- Trump tariff contracts show 4pp calibration edge on Polymarket — the market prices a 62% chance of new tariffs by June, but calibrated probability is 66%
- UK election timing markets diverge 3pp between Polymarket and Kalshi, with Kalshi pricing earlier elections
- Brazil interest rate contracts on Kalshi show a 5pp edge — one of the largest in the emerging markets category
Methodology
Calibration analysis uses Le (2026) recalibration applied to contracts with >$50K volume and >7 days to resolution. The calibration slopes are derived from 292M historical trades across political, economic, and geopolitical categories.