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PredictionMarketBench: A SWE-bench-Style Framework for Backtesting Trading Agents on Prediction Markets

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  • Avi Arora
  • Ritesh Malpani

Abstract

Prediction markets offer a natural testbed for trading agents: contracts have binary payoffs, prices can be interpreted as probabilities, and realized performance depends critically on market microstructure, fees, and settlement risk. We introduce PredictionMarketBench, a SWE-bench-style benchmark for evaluating algorithmic and LLM-based trading agents on prediction markets via deterministic, event-driven replay of historical limit-order-book and trade data. PredictionMarketBench standardizes (i) episode construction from raw exchange streams (orderbooks, trades, lifecycle, settlement), (ii) an execution-realistic simulator with maker/taker semantics and fee modeling, and (iii) a tool-based agent interface that supports both classical strategies and tool-calling LLM agents with reproducible trajectories. We release four Kalshi-based episodes spanning cryptocurrency, weather, and sports. Baseline results show that naive trading agents can underperform due to transaction costs and settlement losses, while fee-aware algorithmic strategies remain competitive in volatile episodes.

Suggested Citation

  • Avi Arora & Ritesh Malpani, 2026. "PredictionMarketBench: A SWE-bench-Style Framework for Backtesting Trading Agents on Prediction Markets," Papers 2602.00133, arXiv.org.
    • Handle: RePEc:arx:papers:2602.00133
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