Prediction market arbitrage exploits pricing inefficiencies on platforms like Polymarket and Kalshi. When YES and NO contracts on the same event sum to less than $1.00, buying both guarantees profit regardless of outcome. The gap exists due to new information, low liquidity, or cross-platform differences. While individual profits are small (e.g., $0.03 per pair), they scale linearly and are risk-free. However, fees, slippage, execution speed, and liquidity constraints limit profitability for manual traders. Most successful arbitrage is automated, with bots monitoring hundreds of markets simultaneously to capture fleeting opportunities.
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