The Kalshi contracts team takes on a tumultuous and news-heavy market
Introduction: In this series, the Kalshi contracts team analyzes past interesting markets. Here, Will and Xavier explain the newsworthy market moves in INFRA-001, one of the top Kalshi markets in August 2021.
INFRA-21AUG10 traded on whether the bipartisan infrastructure bill passed before August 10, 2021: if the bill passed the Senate before August 10, those holding the Yes side of the contract would gain $1 per contract held. If it failed to pass the Senate before August 10, those holding the No side of the contract would gain $1 per contract held. The bill represents a major bipartisan effort to spend hundreds of billions of dollars on everything from electrical system upgrades to lead removal to passenger rail repairs. It also bears symbolic significance as it represents a rare case of bipartisanship amidst the recent rise in polarization.
The market prices moved rapidly to incorporate new information. The market jumped to north of 70 cents almost immediately based on reporting that key senators from both parties were interested in the bill’s passage, representing the market’s belief that there was a 70 percent chance that the bill would pass before August 10. When Senate Majority Leader Chuck Schumer announced that a vote would be held to advance the bill to the Senate floor on August 7, traders rapidly incorporated this new information and drove the price up to 79 cents.
However, as the initial vote dragged on, reporting suggested that a final vote would occur on August 9th (rendering a Yes determination) or August 10th (rendering a No determination), causing market prices to tumble to 40 cents. The price continued to inch down as little news of the vote’s timing trickled out before finally collapsing to zero as the final vote was announced for the morning of August 10th, all but assuring a No determination.
While the aforementioned represent the largest spikes in volume and movement in price, there was heavy intra-event trading as well, as traders adjusted their priors based on smaller information drops, including the absence of the information. For example, when Schumer did not announce any further information about the vote’s timing on August 8th, that indicated to traders that a vote on August 9th was unlikely and the price began its slide towards 0.
Ultimately, the bill failed to pass the Senate by August 10 and the outcome of the market was No.