The Settlement Station Is Not The City — And It Costs People Money
How do Kalshi temperature markets settle? On one number from one named weather station: the settlement station written into the rules of each market. Not on the city's temperature, because a city does not have a temperature; it has dozens of thermometers that disagree with each other every single day. The contract grades on the official reading from that one designated station, and if you are trading off the number in your phone's weather app, you are trading a different instrument than the one you bought.
That sentence is this whole article. The rest is the proof, the sharpest real example we know (Houston, where the settlement station and the airport everyone assumes are two different airports), and a habit that takes fifteen seconds and would have saved a lot of people real money: open the rules and find the station before you place anything.
In Summary
- Every Kalshi Temperature Market Settles On One Named Weather Station. The official reading from that station decides the contract at $1 or $0. No other thermometer matters.
- The Station Is Written In The Market's Rules. On the market page it lives in the rules text (the
rules_secondaryfield, if you are reading the API), which points at the official climate report, the CLI, for a specific station code. - Houston Is The Trap In Its Purest Form. Houston markets settle on Hobby Airport (station code HOU), not Bush Intercontinental (IAH). Two airports, one city, different readings on the same day.
- A Weather App's City Temperature Is Not The Settlement Number. Apps show a blended or nearest-sensor reading for a metro area. The contract does not care about any of it.
- The Risk Shape Makes The Mistake Expensive. Selling an unlikely band collects a small premium and risks most of a dollar; one loss can erase the premiums from thirty or forty wins. A station mix-up is exactly how that one loss happens.
One Thermometer Gets The Final Word
If you have read our explainer on how prediction market contracts work, you know the structure: a city's daily high or low is split into bands, each band trades as a yes/no contract, and the band containing the official number pays $1 while every other band pays $0. These are CFTC-regulated event derivatives, and binary settlement is what makes the price readable as a probability.
But binary settlement needs an unambiguous number, and "the temperature in Houston" is not unambiguous. So each market's rules name a settlement source: the official daily climate report, the CLI report the National Weather Service issues for one specific station. That station's high or low is the settlement number. Period. A heat wave that scorches the north side of town means nothing if the designated station reads two degrees cooler.
This is the detail that separates people who read the instrument from people who read a forecast. And it leads straight to the best example of the trap anywhere on the exchange.
Houston Settles On Hobby, Not Bush Intercontinental
Ask most people to name Houston's airport and they will say Bush Intercontinental, the giant international hub. Houston's temperature markets do not settle there. They settle on the reading at William P. Hobby Airport, station code HOU, the smaller field on the city's southeast side.
That distinction is not trivia. The two airports sit roughly a metro area apart, and Hobby is much closer to Galveston Bay. Different location, different microclimate, different official readings on the same afternoon. A trader watching conditions "in Houston" through an app, a TV graphic, or the IAH departures board can be watching a number that runs meaningfully apart from the one thermometer the contract actually grades on.
Here is the part worth sitting with: both readings are real. Nobody is wrong about the weather. The trader who loses this way was right about the city and wrong about the instrument, which stings more than losing a coin flip and is far more avoidable.
Your Weather App Is Quoting A Different Instrument
The app problem is the same trap with better packaging. When a phone says a city is 99°, that number comes from whichever sensor or blended model feed the app's provider favors for your location — a fine answer to "should I wear shorts," and not even an attempt at the settlement number. That number is the official station figure in the CLI report, and only for the station the rules name. An app can be two degrees off the official figure while being perfectly accurate about the air outside your window. Trade off the app and you have introduced an error that has nothing to do with how well you read weather: you are pricing one thermometer and getting graded on another.
A Worked Example: Losing While Being Right
Walk through a representative Houston afternoon, with illustrative numbers, and watch where the money goes.
| The Number | Where it comes from | Reading |
|---|---|---|
| Weather App "Houston" | blended metro feed | 99° |
| Bush Intercontinental (IAH) | inland, north side | 99° |
| Hobby (HOU) — The Settlement Station | southeast, near the bay | 97° |
A trader opens the app, sees 99°, and buys Yes on the 99°–100° band at 30 cents, feeling sharp about it. The bay breeze does what it often does to Hobby's afternoon, the CLI report for HOU prints a high of 97°, and the 97°–98° band settles at $1. His band settles at $0.
The row that matters most in that table is not the bolded one. It is the middle one: IAH agreed with his app. Two of the three thermometers in the table said he was right, and he still lost the full 30 cents per contract, because neither of those thermometers is in the rules. Settlement is not a vote among sensors. It is one station, named in advance, and everything else is scenery.
The Fifteen-Second Habit: Find The Station Code
The fix costs almost nothing. Before you trade any temperature market, open the market's rules and find the station. On the market page that is the rules text under the contract terms; if you are reading the market through the API, it is the rules_secondary field. Either way you are looking for the same thing: the named settlement source, the CLI climate report and its station code — HOU for a Houston market, not IAH.
Then price the market off that station's official readings, not the app's blend. Every city has its own version of this trap, because every market has exactly one designated station and a metro area full of thermometers that are not it. The habit generalizes: read the rules on every market, every time. That is fifteen seconds. The alternative, as the worked example shows, can be the whole premium.
If that habit sounds obvious, good. It is also the single most commonly skipped step we see among people who come to these markets from sports betting, where "the score" needs no fine print. On an exchange, the fine print is the instrument.
The Risk Shape Makes This Mistake Expensive
One more layer, because station risk and payoff shape compound each other. A common style of trade in these markets is selling an unlikely band: collect a small premium, risk most of a dollar. Roughly speaking, one loss erases the premiums from thirty or forty wins. That arithmetic, not the hit rate, is what makes position sizing the whole game — and it means a single station mix-up can hand back a long stretch of careful profits in one afternoon.
We say this from the selling side of the table. Stokastic trades these markets and holds positions in them, and we publish the settled results, losses included, on our Kalshi weather markets hub. Our public log is young and unproven: across the 24 contracts we have tracked to settlement for calibration, the market implied those outcomes would hit about 3.7% of the time and they hit 4.2%, but the 95% confidence interval around that realized rate runs from 0.7% to 20.2% and contains the market's number. Nothing there is statistically significant in either direction; resolving a difference that small takes on the order of a thousand settled contracts. We judge the strategy on that sample-size reality, never on a night's results, and nothing in this cluster is a pick.
Read The Rules Before You Read The Sky
Zoom back out. Kalshi temperature markets settle on one named station's official climate report, the station lives in the market's rules, and Houston's is Hobby, not Bush Intercontinental. Everything else in this article follows from those three facts. The forecast can be your opinion; the station is the contract. Traders who internalize that stop losing the specific, avoidable way our worked example loses, and start losing (and winning) only on the merits of their read.
The deeper skill, reading the actual terms of the instrument before pricing it, transfers well beyond weather. A point spread at DraftKings or FanDuel is usually posted at -110 on both sides, a built-in overround of about 4.8% that works out to roughly 4.5% hold; you only see the fair price once you de-vig it, the same way you only see the real settlement number once you find the station. That reflex is also what makes line shopping work: two prices on an odds screen only mean something once you read them both as probabilities. The same discipline runs through sports markets on Kalshi, where settlement terms shape the trade the way Kalshi's fee schedule shapes a thin edge. And if you would rather watch probability-first thinking applied to games while you get comfortable, our free expert picks are an easy, no-cost place to see it in action.
FAQ: Kalshi Temperature Market Settlement
How do Kalshi temperature markets settle? Each market settles on the official daily climate report (the NWS CLI report) for one specific weather station named in that market's rules. The band containing that station's official high or low settles at $1 per contract; every other band settles at $0.
Where do I find the settlement station? In the market's rules on the contract page — the rules_secondary text if you are using the API — which names the settlement source and station. Check it on every market before trading.
Which station settles Houston temperature markets? William P. Hobby Airport (HOU), not Bush Intercontinental (IAH). The two airports can post different official readings on the same day.
Why doesn't my weather app match the settlement number? Apps show a blended or nearest-sensor metro reading. The contract grades only on the designated station's official figure, and the two can differ by enough to flip a band.
Disclosure and fine print. Stokastic trades Kalshi weather markets and holds positions in them; where a settled position is described in this series, we were the seller. Kalshi weather contracts are CFTC-regulated event derivatives traded on a designated contract market, not sportsbook wagers, and a position can lose its full value. 18+, available where Kalshi operates; the risk of loss is real and, on the side we trade, individually large. This series is an open research log of a strategy we have not proven. Nothing here is trading advice, and nothing on this page is a pick or a recommendation.
