Polymarket: Pricing error brings 40 million USD profit to traders

A new academic study shows that traders have earned over 40 million USD almost "risk-free" by exploiting price discrepancies on Polymarket, the largest prediction platform currently, during the period of 04/2024 – 04/2025.

#####Arbitrage mechanism

• In the binary market, the price of "Yes" + "No" must equal 1 USD (100%), but often the total value is lower or higher than this → traders can buy/sell on both sides to secure profits.
• In addition, related logical markets ( such as "Trump wins the presidential election" and "Republicans win the presidential election" ) are sometimes priced 10–15 percentage points apart, opening up opportunities for more complex arbitrage.

#####Research results

• The research team analyzed 86 million on-chain transactions on Polygon, discovering over 7,000 measurable mispricing cases.
• The majority of profits belong to a small group of traders using high-speed bots. The most profitable trader earned over 2 million USD, and the top 10 accounts collected more than 10 million USD.
• Some "huge" cases for a profit of nearly 59,000 USD in just 1 transaction.

#####Causes of mispricing

• Liquidity fragmented across multiple markets.
• Investor psychology focuses solely on one question, ignoring inter-market logic.
• Market latency in hot events.
• The limitations of the bot/market maker have not yet adjusted the price.

👉 Conclusion: The prediction market is not as "perfect" as expected. Arbitrage still exists and is maximally exploited by bots, turning Polymarket into a "gold mine" for a select few professional traders.