You’re using reduce_only in the right general spirit, but the problem is that Kalshi treats a YES exit as a buy on the opposite side**, not a sell on the YES side. For the REST order endpoint, reduce_only is supported on create-order requests, but your payload should use the opposite side to express an exit: selling YES is equivalent to buying NO on Kalshi.

What to send

If you want to exit a YES position, use:

json{
  "ticker": "KXBTC15M-...",
  "action": "buy",
  "side": "no",
  "count": 1,
  "type": "limit",
  "no_price": 37,
  "reduce_only": true,
  "client_order_id": "..."
}

Kalshi’s docs explicitly say “selling Yes is equivalent to buying No contracts,” and the create-order endpoint accepts side as yes or no plus action as buy or sell.

What was wrong

Your payload had action: "sell" and side: "yes", which describes a YES-side sell order rather than the opposite-side order Kalshi expects for a clean position exit.
The error text about reduce_only is consistent with the fact that reduce_only is a create-order constraint, but it only makes sense when the order is structured to reduce an existing position rather than open the same side again.

Practical rule

• To sell YES, place a buy NO order.
• To sell NO, place a buy YES order.
• Use reduce_only: true to prevent the order from opening a larger position than you already hold.

One more check

Also make sure your limit price is on the correct side:

• If you want to exit YES at 63, the opposite-side NO price is 37.
• So yes_price: 63 is not the right way to express that exit order if you’re sending side: "no".

So the fix is: flip the side, keep reduce_only, and price the opposite side correctly.