A Primer for Diving into Prediction Markets

By Jason Pipkin

This article was written by a member of the Kalshi community. Their opinions and perspectives are their own and do not reflect the views of Kalshi, nor do they constitute investment advice.

Vaccine/Booster MarketsWhen trading on vaccine and booster markets, there are some important nuances to note regarding the CDC's daily updates. The CDC will post official updates on vaccine and booster numbers on the website dashboard. In the past, the dashboard has typically updated between 2 PM and 5 PM ET. However, the White House Covid-19 Data Director (Dr. Cyrus Shahpar) will usually post daily updates on his Twitter (@cyrusshahpar46) between 11 AM and 4 PM ET. This will be well in advance of the dashboard on most days. Hence, his Tweets will move the market and be vital to track if trading in this market.

This has become commonplace knowledge for most vaccine/booster market traders by this point, and it is a must-know for anyone who might be trying to dive into them. I recommend tracking the daily data in a spreadsheet to monitor how vaccine/booster doses have been panning out. You can also grab the historical data directly from the CDC, which is highly useful for populating your sheet. Feel free to track week-over-week increases/decreases or even visually graph new daily doses over time if that helps you.

Also keep track of any historical corrections and adjustments from states updating their databases, as those can cause large changes to the existing numbers and make or break a market that seemed certain to resolve one way or another.Geomagnetic Storm MarketsGeomagnetic storm markets are another interesting one to track. The geomagnetic storm markets resolve based on the data updates from the NOAA Space Weather Prediction Center (SWPC). Luckily, this center allows you to set alerts on this webpage if trading in this marketIn addition, it is vital to actively monitor the SWPC homepage which will be updated faster than the resolution source. The homepage will always show the current activity level as well as daily maximum/minimum.

The homepage will also have updates regarding upcoming warnings for geomagnetic activity as well as predictions for how the K-Index will evolve in the near future. Also recommended to check other sources as geomagnetic activity is (evidently) a global phenomenon and other national/international science agencies may occasionally post information regarding activity faster than NOAA/SWPC.

Karjakin Chess MarketsLastly, we get to a very interesting market dynamic in the Karjakin Chess market. As per the February 27 announcement by FIDE (International Chess Federation), GM Sergey Karjakin (along with GM Sergei Shipov) were referred to the FIDE Ethics and Disciplinary Commission (EDC) as part of a unanimous vote by the FIDE Council / Presidential Board (PB) for his comments supporting the Russian invasion of Ukraine. For this market, I was extremely bullish on Karjakin being banned from FIDE by the EDC and not allowed to play in the FIDE 2022 Candidates Tournament. Despite the low liquidity, I amassed around 8000 shares at a price of around 90 cents and augmented that with side bets for a total exposure of around 12K. I was virtually the entire share of Y shares for the majority of the market. Considering the deep entrenchment of Russian influence and backing in FIDE—FIDE’s current President Arkady Dvorkovich is Russian and ex-Kremlin—it did come as a moderate surprise to many folks that FIDE took a strong stance against the invasion. FIDE barred Russian/Belarusian teams from competing in the Chess Olympiad but allowed individuals to play in tournaments as long as they either played under a neutral or FIDE flag or switched federations.It is worth noting that between 2015 and 2022, all six ethics cases in the publicly available database that were forwarded to the EDC by the PB resulted in guilty verdicts. FIDE as an organization has stood staunchly behind its denouncement of the Russian invasion, and the vote by the PB was unanimous. While independent, the EDC generally follows the overall ideology of FIDE rather closely and has historically sided with the PB in most cases. Given the unanimous support, I expected this case to follow in those footsteps. Furthermore, Karjakin escalated his comments on Twitter throughout March and continually supported Putin’s actions. He even declared that he would follow any decision by his country “in any situation without thinking for a second” and in a letter addressed directly to Putin indicated that he was in full support of the “denazification of Ukraine". While FIDE generally steers clear of politics, this was a particularly egregious case. Given past guilty verdicts, I expected anywhere from a 3-12 month ban to be handed down by FIDE which would preclude Karjakin from playing in the Candidates.In the FIDE Code of Ethics, there were two main clauses that Karjakin allegedly had breached. This was widely reported by news articles, and I combed through the Code of Ethics to confirm it for myself. 2.2.10: In addition, disciplinary action in accordance with this Code of Ethics will be taken in cases of occurrences that cause the game of chess, FIDE or its federations to appear in an unjustifiable unfavorable light and in this way damage its reputation.2.2.11: Any conduct likely to injure or discredit the reputation of FIDE, its events, organizers, participants, sponsors or that will enhance the goodwill which attaches to the same.Especially given Karjakin’s continued unapologetic escalation, it became increasingly clear that it would be difficult to avoid harsh sanctions by FIDE. Typically, it takes months for ethics cases to wrap up, but it was shared publicly by Vice-President GM Nigel Short that the process for this specific case had been expedited with a verdict likely expected within a few weeks. The messaging also carried the implication that Karjakin was likely to be found guilty but due process was necessary. Researching the six members of the EDC, none of them were from particularly Russian-friendly federations. The chairman Francois Strydom and David Hater have also previously been at least moderately opposed to Russian influence in FIDE and critical of President Dvorkovich. It did not seem they would be sympathetic to Karjakin, and Karjakin had also previously lost an ethics case he filed a few years ago. Researching the commission rules, a tie notably could be broken by the chair which meant that Karjakin would likely need to have a 2-4 decision (given full attendance and no abstaining) to avoid a guilty verdict. This would be a tall feat.There were pathways for this bet to fall flat, and I recommend always walking through what could cause a seemingly surefire bet to fail. This is a shortlist of considerations I went through, largely unedited from when I posted them originally last week.

We already know the FIDE Council was unanimous in their decision regarding Russia/Belarus, and that they referred Karjakin to FIDE EDC. Moreover, we know part of the FIDE Code of Ethics was violated. Given Karjakin’s escalation and staunch support of Putin, it was clear he was doing the opposite of walking back any statements. This gave little room for leniency by the EDC. Even the shortest Guilty verdict for PB-forwarded cases was 6-months, so even a minimal ban would stop Karjakin from playing. It did not seem likely that the EDC would issue a warning, which would be allowed by the Ethics rules. Even if FIDE EDC found him Not Guilty or the case Non-Admissible, there was some chance Karjakin could have issues actually traveling to Spain if his visa were denied. On March 21, FIDE announced that the EDC had reached a verdict. The EDC unanimously (6-0) found that Karjakin had violated Section 2.2.10 of the FIDE Code of Ethics, and effective immediately, imposed a 6-Month ban barring him from playing in any FIDE tournaments. The World Chess Championship website also updated the Candidates roster to indicate that he had been suspended by the EDC decision, subject to appeals.

This same piece-by-piece policy analysis is the framework by which many prediction market pros craft their events-based trading strategies. Being able to consider the whole outcome space is an important part of investing, and is no different for prediction markets! Abhishek Kylasa (a.k.a. aenews)All examples in this article are hypothetical interpretations of situations and are used for explanation purposes only. The views in this article reflect solely those of the author and not those of Kalshi or its affiliated institutions. This article and the information herein should not be considered investment advice or the results of actual market experience.