Pricing for the same event may differ across platforms, and that's where the opportunity lies.
Written by: Pix
Compiled by: Luffy, Foresight News
While most people gamble on prediction markets, I arbitrage them. Here's my specific strategy for earning $100,000 from fragmented, inefficient prediction markets.
Step 1: Understand the Rules
Prediction markets allow you to bet on the outcomes of real-world events, such as:
- "Will Ethereum reach $5,000 by the end of the year?"
- "Will MrBeast run for president?"
- "Will Kanye West issue a token?"
Each market has different user groups, each with their own biases. This means that the same event may be priced differently on different platforms, and that's where the opportunity lies.
Example: If platform A quotes "Yes" at $0.4 and platform B quotes "No" at $0.55, you can lock in a $0.05 profit regardless of the outcome - that's arbitrage.
Step 2: Find Your Advantage
The most effective strategy for me is multi-outcome markets, which are most prone to pricing errors.
Examples:
- Who will win F1 this weekend?
- Which party will win the UK election?
- Who will be eliminated next on 'Love Island'?
Theoretically, the probabilities of all outcomes should sum to 100%, but in reality, they often reach 110%.
Reason: Platforms typically charge hidden fees ("excess premium"), and odds are determined by users, leading to numerous inefficient pricings.
Step 3: How to Identify Arbitrage Opportunities
Core rules:
- Find the same event on different platforms;
- Choose the lowest price for each outcome;
- If the total price is below $1, you can arbitrage.
Real-world case: Who will be the next Pope?
Quotes from two platforms:
The strategy is to buy all outcomes, one of which will definitely be realized, ensuring you get $1. The profit per transaction is $0.021 (2.1% risk-free return) - that's arbitrage. You're not betting on who will become Pope, but on the two platforms failing to agree on who will become Pope. When they disagree, you make money.
Myriad's liquidity is much lower, but two other websites have even closer price differences. If you pay attention to more markets, you'll find greater advantages.
I typically only arbitrage when the APY is above 60% (APY = (Price Difference / Resolve Days) × 365).
In this example, the event ends in 29 days:
(0.021 / 29) × 365 ≈ 26.4% APY (below my 60% threshold, skip).
If the event ends in 7 days:
(0.021 / 7) × 365 ≈ 109.5% APY (definitely enter).
Step 4: Race Against Time
Prediction market arbitrage is a game of delay:
After price differences appear, you usually only have a few minutes, not hours; rumors spreading, platform updates lagging, etc., can cause price differences, and your advantage only exists during this time.
If possible, automate this part, use price alerts on Discord, Telegram, and Twitter. Sometimes I can spot price differences by muscle memory alone. The faster you act, the more you earn. Hesitate for 5 minutes, and the price difference disappears. My best price difference was 18%, which was quite substantial.
Remember to ensure available funds on each platform and be clear about fees.
Step 5: Exit Early
Most people wait for the result, but I profit before the outcome is clear.
Suppose I buy all outcomes for $0.94, giving me a $0.06 price difference. I don't need to wait for the result; if the market tightens, I can sell at $0.98 or $0.99 and exit.
This significantly improves APY and allows quick switching to the next market.
Additional Tips
- Look for overlapping events: "Trump wins 2024 election" and "Republican Party wins" may have hidden arbitrage;
- Target small markets: more pricing errors, less competition;
- Use niche platforms: larger price differences, potential airdrop rewards;
- Read settlement rules carefully: a single word might change the outcome;
- Verify carefully: confirm order book, transaction prices, calculate including all fees.
Summary
I earned $100,000 in just over two months, with periods of calm and busy times. The more volatile the market, the more price differences exist, but even in calm markets, there's always another inefficient market waiting to be discovered.
