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Arbitrage Opportunities in Prediction Markets 2025
Marcus Chen
Dec 2, 2025
9 min read
Understanding Prediction Market Arbitrage
Arbitrage exploits pricing inefficiencies between markets to generate risk-free or low-risk profits. In prediction markets, opportunities arise when the same event trades at different probabilities across platforms, or when related markets become temporarily mispriced.
Successful arbitrage doesn't require predicting outcomes—only identifying and capturing price discrepancies before they correct.
Types of Prediction Market Arbitrage
Cross-Platform Arbitrage
The same event trades on multiple platforms (e.g., Polymarket, Kalshi). When probabilities diverge by more than transaction costs, traders buy the underpriced side and sell the overpriced side.
Intra-Platform Arbitrage
Related markets within Polymarket become mispriced relative to each other (e.g., state election probabilities vs. national winner probability).
Time Arbitrage
Markets with different resolution dates for the same event may temporarily diverge, creating calendar spread opportunities.
Outcome Arbitrage
In multi-outcome markets, prices occasionally sum to more or less than 100%, enabling guaranteed profits by trading all outcomes simultaneously.
Identifying Arbitrage Opportunities
Manual detection is impractical. Effective arbitrageurs use automated systems that:
- Monitor Multiple Platforms — Track prices across Polymarket, Kalshi, PredictIt, Metaculus, etc.
- Calculate Implied Probabilities — Normalize prices accounting for fees and spreads
- Flag Discrepancies — Alert when price gaps exceed minimum profit thresholds (2-5%)
- Estimate Capacity — Calculate maximum trade size before market impact erodes opportunity
- Execute Automatically — Submit orders across platforms simultaneously
Case Study: 2024 Election Arbitrage
During the 2024 U.S. Presidential Election, significant arbitrage opportunities emerged:
- October 15, 2024: Polymarket priced Candidate A at 52%, Kalshi at 48%. Arbitrageurs captured 4% risk-free returns.
- October 28, 2024: State-level markets implied national probabilities diverging 6% from the headline market.
- November 4, 2024: Outcome prices briefly summed to 103%, allowing traders to lock in 3% guaranteed profit.
Required Infrastructure
Successful arbitrage requires:
- Multi-Platform Accounts — Verified, funded accounts on major markets
- API Access — Programmatic connections for data and execution
- Monitoring Software — Systems that continuously scan for opportunities
- Execution Systems — Automated trading across platforms within seconds
- Capital — Sufficient funds distributed across platforms
Calculating Arbitrage Profitability
Verify that profits exceed all costs:
- Trading Fees — Platform transaction fees (1-2%)
- Spread Costs — Difference between bid and ask prices
- Withdrawal Fees — Costs to move profits between platforms
- Capital Lockup — Opportunity cost of tied-up funds
- Execution Risk — Slippage if prices move during execution
Start Capturing Risk-Free Profits
Use PolyTools' multi-platform arbitrage scanner to detect and execute opportunities efficiently.
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