By: Noah Sternig

The opinions and perspectives presented in this article belong solely to the author(s). Kalshi does not provide investment or trading advice or make any other claim to the veracity of the contents described herein and provides this article solely for the convenience of its members.

Like many American undergraduates, I have federal student loans that were approved for student loan forgiveness. Regardless of if you are for or against Biden’s loan plan to proceed, if you are in a similar place as I am, you might be able to make a risk-free profit using Kalshi’s Student loan forgiveness SCOTUS case market.

If one anticipates that they would be eligible for the forgiveness, they would be able to set up an arbitrage calculator to generate a risk-free rate of over 10% annually, approximately 6% more than the U.S. 2 Year Treasury yield. Below is a calculation based on the assumption that a federal student loan borrower has $10,000 in loans eligible for forgiveness (the most likely scenario).

As one can see, the net outcome for the borrower in this instance is a profit of $1,700 regardless of the outcome of the Biden v. Nebraska Supreme Court case. The first outcome “yes” would result in the investor having $10,000 in student loans forgiven (gain of $10,000) and would have their $8,300 position on “no” expire worthless (loss of $8,300) resulting in a net profit of $1,700. The more likely scenario according to Kalshi markets (with an over 80% chance of occurring is the “no” outcome. This would result in the investor not having $10,000 in student loans forgiven (no gain or loss) and their $8,300 position on “no” would be executed with a payout of $10,000 (gain of $1,300) resulting in a net profit of $1,700.

Pretty cool right?

For this to be possible, a Kalshi user would have to purchase 10,000 contracts for the outcome “no” at its current price. With this being said, many people may not be comfortable taking this large of a position, but it presents an important use case for Kalshi and how retail investors can hedge their own unique personal situations.

If you are interested in entering a position such as the one I have outlined above, I highly recommend you do your research and assess your personal risk tolerance. Many different people stand to benefit from the markets that Kalshi provides, and this is only one small example.