Arbitrage is the attempt to lock in a profit from a price difference for the same or an equivalent outcome, by trading both sides at once rather than betting on a result.
Last reviewed 20 June 2025 · Educational, not advice
In its classic form, arbitrage means buying something where it is cheap and selling it where it is dear at the same time, so the gain comes from the price gap rather than from guessing what happens next. In prediction markets the same idea appears when one outcome is priced differently on two venues, or when the yes and no sides of a single market can be bought together for less than the amount they are guaranteed to pay out.
A common textbook case is the within market check. If a market resolves to exactly one dollar and you can buy the yes and the no contracts for a combined price below one dollar, holding both locks in the difference whichever way it settles, before costs. If the two sides instead cost more than a dollar combined, the mirror trade is to sell both. Across venues, the equivalent is buying the cheaper listing of an outcome and selling the dearer one.
Real arbitrage is far harder than the arithmetic suggests. Fees, the spread, funding and withdrawal frictions, differing settlement rules, and the time it takes to move money between venues can all erase a gap that looked free on screen. Prices also move while you are trying to fill both legs, so you can end up with one side done and the other not, which turns a hedged trade into an open position. Apparent free money usually reflects a cost or a risk you have not counted.
Arbitrage is not advice and not a guaranteed profit. The edges are small, competitive, and quickly closed, and the operational risk is real. Treat any opportunity as something to verify carefully against current fees and rules, and remember that the capital involved is still at risk if a leg fails or a venue settles differently than you expected.
Suppose the yes contract is offered at fifty two cents on one venue and the no contract at forty four cents on another, for the same defined outcome. On paper, buying both for ninety six cents to collect one dollar at settlement looks like a four cent edge. In practice, two sets of fees, the time to fund both accounts, and the chance one leg moves before you fill can wipe the edge out or leave you exposed on a single side.
Illustrative only. Numbers are examples, not a quote or a prediction, and exclude fees.
Apparent arbitrage is rarely free once fees, delays, and settlement differences are counted, and a half filled trade leaves you exposed. Any position on these venues can lose, and a contract can settle worthless. Stake only what you can afford to lose, never to chase a loss, and never on borrowed money. If it stops feeling like a free choice, step back. In the United States you can call or text the helpline on 1-800-GAMBLER or visit ncpgambling.org.
Trying to lock a profit from a price difference for the same outcome by trading both sides at once, rather than betting on the result.
No. Fees, spreads, funding delays, settlement differences, and prices moving mid trade can erase the gap or leave you holding one open leg.
Because many participants watch for them. Competition and costs mean genuine edges are usually small and short lived.
It can, because venues have different users, fees, and rules. But moving money between them takes time and cost, which often explains the gap rather than offering free profit.
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