What is prediction market arbitrage?
A 5-minute primer on where cross-exchange edge comes from, why it disappears fast, and what the math looks like after fees and withdrawal time.
the short version
Kalshi and Polymarket are two of the largest prediction-market exchanges. Each lets traders buy YES or NO shares on a real-world outcome (an election, a Fed decision, a sports result), and each settles for $1 if the outcome resolves in your favor.
Because the two exchanges have different user bases, different liquidity providers, and slightly different products, the same outcome will sometimestrade at meaningfully different prices on the two venues. When the gap is wide enough to absorb both exchanges’ fees, you can buy YES on the cheaper side and NO on the more expensive side and lock in a guaranteed profit on the $1 settlement — that’s a cross-exchange arbitrage.
example
Whichever side wins, you collect $1.00. You paid 96¢ to set it up, so you net 4¢ per pair of contracts. The catch: Kalshi’s and Polymarket’s fees haven’t been subtracted from that edge yet — and arb opportunities close fast (typically within a few minutes) as soon as another trader spots them.
why most hours have no arbs
Both exchanges are reasonably efficient on their high-volume markets. Cross-exchange gaps survive primarily on medium-attention markets: politics outside of the major races, second-tier sports futures, niche macro events. When attention shifts (an election week, a big Fed meeting), gaps open and close in minutes.
That’s the honest baseline of cross-exchange arbitrage — it’s rare. Most retail traders who try to do it manually spend an hour refreshing two tabs and find nothing. The value of a scanner is being there when an arb opens, and only then.
what eats into the edge
- Kalshi fees: percentage of size on trade entry, capped by tier.
- Polymarket fees: 0% trading fees as of writing but USDC gas + bridge costs apply for deposits/withdrawals.
- Slippage: the orderbook is thin. The price you see is the top-of-book — bigger size walks the book and pays worse fills.
- Withdrawal time: your capital is locked until the market resolves. If you arb a 2028 election in 2026, that money is unavailable for 2+ years.
how Tellmarket helps
Tellmarket scans Kalshi and Polymarket every 30 seconds, computes the edge after fees + slippage at top-of-book depth, and shows only the arbs whose net edge is positive. Free preview surfaces the top 5 with a 5-minute delay; Pro shows every active arb in real time with email and Slack/Discord alerts the moment a new one appears.