Introducing PriceArb: Historical Edge Detection for Prediction Markets

Today we're launching PriceArb, a tool that identifies when prediction market prices diverge from historical probabilities.

The Problem

Prediction markets like Kalshi and Polymarket price event contracts based on crowd sentiment. But crowds are emotional. When a team scores, the market reacts. Sometimes it overreacts.

The question we're answering is simple: what does history say should happen from this exact game state?

How It Works

We compare two numbers:

1. Market Probability: What the market currently prices the outcome at
2. Historical Probability: What historically happens from this game state

The edge is the difference between these two numbers.

An Example

Say the Chiefs are down 7 with 8 minutes left. The market prices their win probability at 28%. But historically, the Chiefs in that exact position win 41% of the time.

That's a +13% edge.

Metric	Value
Market Price	28%
Historical Rate	41%
Edge	+13%

The Math

For those interested in the technical details, we bucket game states by time remaining and score differential. The historical probability $P_h$ is calculated as:

$P_h = \frac{\text{wins from state}}{\text{total games from state}}$

The edge $E$ is simply:

$E = P_h - P_m$

Where $P_m$ is the market-implied probability.

Why This Matters

Other tools compare market to market (Kalshi vs Polymarket). We compare market to history.

This is a fundamentally different signal:

Existing Tools	PriceArb
"Kalshi says 35%, Polymarket says 38%"	"Market says 35%, history says 48%"
Arbing venue mispricing	Arbing crowd psychology
Works when platforms disagree	Works when the market is mispricing historical means - on any platform

What's Next

We're starting with NFL games but the methodology works for any event type with historical precedent:

• Sports (all major leagues)
• Elections (with polling data)
• Economic events (Fed decisions, earnings)

Check out the dashboard to see live edges, or stay tuned to this blog for more insights.

---

All trading involves risk. This is a research tool, not financial advice.