An event contract is a new type of asset class that gives investors the ability to make trades on their opinions about a specific yes/no question. That’s why markets on Kalshi are structured as questions.

Investing in a Kalshi market means investing in your opinion about a particular topic, global event, or trend. Each market has two types of contracts, YES contracts and NO contracts, which cover each possible answer to the Yes/No question. As an investor, you buy contracts based on whether you believe the answer to the market question will be YES or NO. If you think that GDP will increase this quarter, you might buy a bunch of YES contracts for that market. Conversely, if you think that GDP will decrease, you would buy NO contracts. Each contract on Kalshi settles to $1 if your answer is right, and $0 otherwise.

Trading Contracts

YES and NO contracts always come in pairs. If you would like to invest in a market, Kalshi will match you with another user on the platform looking for the opposite contract on the same market. One of you will receive a YES contract, the other will receive a NO contract, and in return, the two of you will pay a total of $1.

The fraction that you pay is determined entirely by users on Kalshi trading on the exchange. You tell us the side you want to hold, the price you're willing to pay, and the amount of event contracts you want to buy, and Kalshi will try to match you with whoever is offering the best possible price. From here on, whenever we refer to the market price of a contract, we simply mean the price you'd need to pay to instantly get matched with another buyer.

To put things more concretely, let’s say that you pay market price, $0.60 for a YES contract. That means you matched with another user who paid $0.40 for a NO contract on the same market. If the market resolves to YES, you get the $1: your $0.60, and the other user's $0.40, and the other user loses their investment of $.40. The opposite happens if the market resolves to NO: you lose the $0.60 you originally put in, which is awarded to the other user. Prices for contracts range from $0.01 and $0.99.

You can only trade after depositing money into your Kalshi account, and you can only lose money you’ve used to trade – you will never have any debt with Kalshi no matter what happens. The official term for this concept is that Kalshi is a fully cash collateralized market, meaning that your only collateral (asset used to guarantee an agreement) is the cash you’ve deposited into your account.

Bids

To better understand how a market price is set, it's useful to discuss bids or outstanding orders.  Here's where things get a little complicated, but bear with me. Let's say you're looking to buy a YES contract in some market, and see a price of 40¢. This means that you could pay 40¢ to get a YES contract, or in other words someone else is willing to put up 60¢ to get a NO contract.  Let's call one of those people Bob.  

Now let's flip the script and say we're looking for a NO contract.  If we see a price of 60¢ or lower, we know something has gone terribly wrong, why? If the price is less than 60¢ for a NO contract, that means that someone (let's call them Alice) is willing to put up more than 40¢ for a YES contract.  But remember that Bob was willing to put up 60¢ for his NO contract, so Alice and Bob should have already matched!

So, the prices that you see available to you for a YES and NO contract should always add up to something bigger than $1.  They might be as low as $1.01, and other times over $1.50. The amount over $1 is called the spread of the market, and having low spreads is good for you. Low spreads generally mean that lots of people are trading and the price of the contract isn't going to swing around too much.  It also means that if you make a mistake and need to quickly get out of your position, you can do so without paying too much extra.  

Interpreting a Contract's Price

Prices on Kalshi have a very natural interpretation as probabilities. Remember that a contract pays out $1 when it settles.  If some question has a 40% chance of being answered YES, the expected value of a Kalshi YES contract is 40¢.

Of course, no one really knows the answers to questions on Kalshi (otherwise we wouldn't exist), so prices on Kalshi reflect the probabilities that people believe in.  If lots of people believe that a question is more likely to be answered yes or no than the market reflects, they could buy Kalshi contracts and make a profit (in expectation).  Thus, the prices on Kalshi should reflect the true probabilities for different events!

Just because a decision is expected to be profitable, doesn't mean it always will be.  The price that you are willing to buy a contract at should reflect the probability that YOU believe in.  Plus, you might have alternate reasons for buying Kalshi contracts (see the hedging article for more info on this). Kalshi contracts are simple and intuitive, but still have all of the complexity associated with financial markets.