How to Earn Passive Income on Kalshi: Liquidity Incentive Program Guide

Prediction markets like Kalshi have revolutionized how we bet on real-world events, from elections to economic indicators. But beyond trading, providing liquidity is a powerful way to contribute to market efficiency while earning passive rewards. While strategies vary across platforms, this guide focuses exclusively on mastering liquidity provision on the CFTC-regulated leader, Kalshi.

We’ll explore what liquidity means in Kalshi’s order-book system, the tangible benefits, provide step-by-step instructions, and detail the latest 2025 incentive programs. Whether you’re a novice trader or an experienced market maker, this guide will equip you with the knowledge to participate effectively and earn.

Curious about liquidity on other platforms? Compare strategies across Polymarket, Worm.wtf, and Augur in our comprehensive guide: How to Earn Passive Yield as a Liquidity Provider on Prediction Markets.

Understanding Liquidity in Kalshi’s Ecosystem

In prediction markets, liquidity refers to the availability of buy and sell orders that allow traders to enter and exit positions easily without causing large price swings.

On Kalshi, contracts are binary (Yes/No) outcomes priced between $0.01 and $0.99, representing probabilities. Liquidity providers (LPs) add market depth by placing “resting” limit orders—bids to buy below the current asking price or offers to sell above the current bid.

Without sufficient liquidity, spreads widen, making trading costlier and less efficient for everyone. By adding resting orders, you tighten spreads, improve price discovery, and earn rewards. Kalshi’s structured incentive programs explicitly pay you for this service, turning market making into a source of passive income.

For a foundational understanding of how Kalshi works, see our beginner’s guide: What Is Kalshi? The Complete Beginner’s Guide.

Why Provide Liquidity on Kalshi? The Tangible Benefits

1. Earn Daily Incentive Rewards: Through the Liquidity Incentive Program, you earn a share of daily reward pools (from $10 to $1,000) based on the quality and quantity of your resting orders, even if they don’t get filled.
2. Lower Trading Fees: Maker orders (resting limits) typically incur lower or zero fees compared to taker orders that execute immediately, improving your net returns.
3. Generate Yield on Idle Capital: Kalshi offers a variable APY (around 3.75% as of late 2025) on cash balances and the value of open positions over $250, adding another layer of return.
4. Volume-Based Cashback: If your provided liquidity leads to filled trades, you may qualify for additional cashback through the Volume Incentive Program.
5. Support the Ecosystem: Contributing to robust markets benefits all participants, including yourself, by creating a healthier trading environment.

Prerequisites: What You Need to Start

Before placing your first liquidity-providing order, ensure you have:

• A Verified Account: Sign up at kalshi.com and complete KYC verification with a government-issued ID, as required for this CFTC-regulated U.S. platform.
• Funded Balance: Deposit a minimum of $1 via bank transfer (ACH). Remember, you can trade contracts for as little as $0.01 each.
• Basic Platform Familiarity: Understand how to navigate markets (Politics, Economics, Crypto, etc.) and be aware of standard trading hours (typically U.S. business hours).

Step-by-Step Guide to Adding Liquidity on Kalshi

Adding liquidity involves placing strategic limit orders. No separate sign-up is needed for the basic incentive programs—you qualify automatically by trading in eligible markets.

Step 1: Log In and Select a Strategic Market

Access your Kalshi dashboard and browse categories. For beginners, choose a high-volume market (e.g., major political elections, Federal Reserve decisions) as they offer better chances for order execution and are always eligible for incentive programs.

Step 2: Place a Limit Buy Order (Adding Bid-Side Liquidity)

1. Select “Buy Yes” or “Buy No” for your chosen contract.
2. Switch the order type from “Market” to “Limit”.
3. Enter the number of contracts.
4. Set your limit price slightly BELOW the current best ask (e.g., if “Yes” is offered at $0.66, place a bid at $0.65).
5. Submit the order. It will now rest on the order book, adding buy-side liquidity.

Step 3: Place a Limit Sell Order (Adding Ask-Side Liquidity)

1. If you hold a position, go to the “Sell Yes” or “Sell No” tab.
2. Choose the “Limit” order type.
3. Enter quantity.
4. Set your limit price slightly ABOVE the current best bid (e.g., if “Yes” is bid at $0.31, offer at $0.32).
5. Submit. This adds sell-side liquidity to the market.

Step 4: Monitor and Optimize Your Orders

Use your portfolio page to track resting orders. For maximum incentive scores, keep orders active during core trading hours. Kalshi’s system takes second-by-second snapshots, scoring orders based on size and how close they are to the current best market prices.

Demystifying Kalshi’s 2025 Incentive Programs

To maximize earnings, you must understand the rules. Key programs run through at least September 2026.

1. The Liquidity Incentive Program (Your Primary Tool)

• Mechanics: You are rewarded for orders that rest on the book. Your score is calculated as: Order Size × Distance Multiplier. Your daily reward share is (Your Score / Total All Scores) × Daily Pool.
• Rewards: Daily pools range from $10 to $1,000, with a minimum $1 payout. Funds are typically paid the same or next day.
• Strategy: Place orders as close to the mid-price as possible to maximize the “Distance Multiplier” part of your score.

2. The Volume Incentive Program (Secondary Bonus)

• Mechanics: This program gives cashback on completed trades. Your share is based on your volume relative to total volume, with a cap per contract.
• Key Difference: This rewards filled orders, while the Liquidity program rewards resting orders. You can earn from both simultaneously.

3. Additional Avenues for Yield

• APY on Balances: Earn ~3.75% variable APY on cash and open positions over $250.
• Market-Specific Bonuses: Look out for fixed rewards on special, high-profile markets.

Advanced Strategies for Seasoned Providers

• API Integration: For consistent, high-volume provision, use Kalshi’s official API to automate order placement and management.
• Market Maker Program: High-volume participants can apply for the formal Market Maker Program via support @kalshi.com, which offers reduced fees and higher limits.
• Cross-Market Hedging: Provide liquidity in correlated markets (e.g., different questions about the same election) to manage overall risk.

Essential Risks and Final Best Practices

• Execution Risk: Your resting orders may fill at a price that later proves unfavorable if the market moves quickly.
• Opportunity Cost: Capital used for liquidity provision is tied up and cannot be deployed elsewhere.
• Rule Adherence: Always review the latest official program terms, as rewards can be revoked for abuse or manipulation.

Your Action Plan: Start small in a high-volume market, focus on understanding the incentive scoring, and gradually scale your activity as you gain confidence.

Conclusion: Building a Rewarding Practice

Providing liquidity on Kalshi is a unique blend of market participation and passive income generation. By leveraging its transparent incentive programs, you can be compensated for playing a vital role in the ecosystem’s health.

Start today by funding your account and placing your first strategic limit order. The path to becoming a proficient liquidity provider is a marathon, not a sprint.

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Expand Your Prediction Market Knowledge

Now that you’ve mastered Kalshi liquidity, explore how other platforms operate:

• The AMM Model: Learn about providing liquidity on Polymarket and the innovative Worm.wtf.
• The Decentralized Pioneer: Understand the original model with our guide on What Is Augur?
• All Prediction Markets: Dive into our full Prediction Markets category for more insights and strategies.