How does Kalshi work? A trade, from question to payout

By Ken So, Octagon Research Editor

Kalshi works like a stock exchange for event outcomes. Every market is one yes/no question with a published settlement source. Contracts trade between $0.01 and $0.99 on a central order book, and settle at exactly $1.00 (event happened) or $0.00 (it didn't). The price at any moment is the market's implied probability — and everything else follows from that one mechanic.

The lifecycle of a Kalshi trade

• 1. A market opens. Kalshi lists a question — "Will CPI year-over-year come in above 3.0% for August?" — with the exact settlement source (here, the BLS release) and close time published up front.
• 2. You take a side. Buy YES if you think it happens, NO if you think it doesn't. A NO at 38¢ is economically identical to selling YES at 62¢ — the two prices always sum to $1.00 across the book.
• 3. Orders match on the book. Market orders fill at the best resting price; limit orders wait at yours. Your counterparty is another trader or a market maker — never the exchange.
• 4. The price moves with the news. Every data point, poll, or headline reprices the question in real time. Sharp repricings are news in themselves — Octagon's daily feed is generated by detecting them across every active market.
• 5. Exit early or settle. Sell any time before close, or hold: at settlement, the exchange checks the published source and pays winners $1.00 per contract, automatically.

Reading the price as a probability

Because the payoff is binary, price and probability are the same number in different clothes. A YES trading at 28¢ says the market collectively assigns about a 28% chance. That makes expected value arithmetic unusually clean: if you believe the true probability is 40%, buying at 28¢ has positive expected value of roughly 12 cents per contract before fees. The mechanics of that calculation are in how to calculate expected value, and the interpretation question — when the price is trustworthy and when it isn't — in reading prices as probabilities.

Settlement: where beginners get burned

Kalshi settles mechanically against the market's published rules — not against the headline, not against common sense, and not against what "everyone knows" happened. If a market says "announced by the close date" and the announcement lands a day late, it settles NO. The rules text is short; read it before every trade. Our deeper guide: why settlement rules matter more than headlines.

What it costs

Kalshi charges per-contract trading fees that scale with price — highest for contracts near 50¢, where outcome uncertainty is greatest, and near zero at the extremes. For most traders the larger cost is the spread on thin markets. The complete picture, with worked examples, is in Kalshi fees explained.

Where research fits

The market price is the crowd's estimate. Beating it requires an independent estimate of the same probability — which is exactly what Octagon builds: an AI research report for every active Kalshi market, comparing a model probability against the live price and citing the drivers. The difference between the two is what we call edge, and it's browsable across the whole exchange at octagonai.co/markets.

Frequently asked questions

How does buying a contract on Kalshi actually work?

You pick a market — a precisely worded yes/no question — choose YES or NO, and place an order. A market order fills at the best available price from other traders; a limit order sits in the book at your price. Each contract costs its price in cents (a 62-cent YES costs $0.62) and pays $1.00 if you're right, $0.00 if you're wrong.

How does Kalshi decide who won a market?

Every market lists its settlement source before you trade — a government data release, an official result, a named publication. When the outcome is determinable, the exchange settles the contract mechanically against that source: YES holders get $1.00 per contract or NO holders do. Reading the exact settlement rules is the single most important habit on Kalshi.

Can I sell before the event resolves?

Yes. Contracts trade continuously until the market closes, and most active traders exit early. If you bought YES at 40 cents and news moves the price to 70 cents, you can sell for a 30-cent profit per contract without waiting for settlement.

How does Kalshi make money?

Trading fees. Kalshi charges a per-contract fee that scales with the contract price — largest for contracts near 50 cents, smaller near the extremes — rather than profiting when traders lose. The exchange matches buyers and sellers; it does not take the other side of your trade.

What's the minimum to start on Kalshi?

Contracts cost between $0.01 and $0.99 each, so a position can be under a dollar. Accounts require standard KYC identity verification and fund in US dollars, with bank transfer and debit card among the supported methods. Deposit minimums are small — check Kalshi's current funding page for the exact figure rather than assuming none.