You’re scanning markets on a Wednesday afternoon when something jumps out: Kalshi has a Fed rate-cut contract trading at 48, while another platform is showing 53 for what looks like the exact same thing. Buy low at 48, sell high at 53—boom, five points locked in.
It feels like free money. But seasoned traders know: what looks like easy arbitrage is usually more complicated. Here are some things to check before you start bragging to the group chat about the free lunch you just found.
Step 1: Are These Really the Same Contract?
On the surface, both contracts ask the same question: Will the Fed cut rates in 2025?
But look closer.
- Kalshi phrases it as: “Will the Fed cut rates by December 31, 2025?”
- Another platform phrases it as: “Will the Fed cut rates at or before the Fed’s December 2025 meeting?”
Those sound similar—but they’re not identical.
Imagine the Fed skips its scheduled December meeting but then calls an emergency session on December 20, 2025. A cut there would trigger YES on the calendar-based contract (ends Dec 31) but NO on the meeting-based one. Suddenly your “risk-free” spread is exposed to a very real difference in settlement.
Step 2: Counting the Invisible Costs
Even if the contracts align perfectly, the math can still betray you. That 5¢ spread shrinks once you account for fees, bid-ask spreads, and the friction of moving money between venues. What looks like five points on the screen might net out to two—or worse, zero—once the dust settles.
Step 3: The Fill Problem
Execution is where theory meets pain. Suppose you grab the Kalshi “YES” at 48. Before you can sell the other side at 53, liquidity dries up and the best bid drops to 51. Now you’re holding one leg naked, exposed to market swings. That’s not arbitrage—it’s speculation in disguise.
Cross-exchange arbitrage is all about diligence. The edge doesn’t come from just spotting the spread—it’s in confirming the details, dodging liquidity issues, and remembering that in prediction markets, every “sure thing” deserves suspicion until proven otherwise.
