What Prediction Market Arbitrage Actually Is
Pure arbitrage is the simultaneous purchase and sale of equivalent assets at different prices to lock in a guaranteed profit. In prediction markets, this occurs when the same binary question is priced differently across two platforms — say, a "YES" share for 55p on one platform and 45p on another, where both resolve to £1. Buying YES at 45p and the implied NO (i.e. selling YES at 55p) theoretically locks in 10p regardless of outcome.
The Hidden Costs That Eat Your Arb
- →Withdrawal and deposit timing: getting money between platforms takes time. Markets can move before your position is established.
- →Platform fees: spreads on both platforms can eliminate the theoretical arb margin entirely
- →Resolution differences: two platforms may phrase the same question slightly differently, meaning they resolve differently
- →Liquidity limits: the arb size is capped by the thinner market's depth — and larger arbs attract sophisticated traders who close them fast
- →Counterparty risk: one platform's viability is a real consideration for arbs with long resolution windows
Arb opportunities in prediction markets exist and are real — but they close within minutes on liquid markets. The sustainable arb strategy is to be fast (automated monitoring) and accept small margins on high volume, or to find structural arb opportunities on less liquid markets where information is locally concentrated.
Boromarket's prices are continuously calibrated against market consensus. Genuine arb opportunities typically last seconds on popular markets — but niche markets sometimes sit mispriced for hours.