/polymarket-analyzer

Polymarket Fee Model

Overview

Most Polymarket markets are fee-free. Dynamic taker fees apply only to short-duration crypto markets (5-minute and 15-minute expiry).

Fee-Free Markets

The vast majority of markets on Polymarket -- political, sports, entertainment, weather, and long-duration crypto markets -- charge zero fees for both makers and takers. This makes arbitrage significantly more viable than on traditional exchanges.

Dynamic Taker Fees (Crypto Short-Duration Only)

For 5-minute and 15-minute crypto prediction markets, a dynamic taker fee applies:

feeQuote = baseRate * min(price, 1 - price) * size

Where:

• baseRate is set per market (typically 0.063 or 6.3%)
• price is the execution price (0 to 1)
• size is the number of shares

Effective Fee Rate by Price

The fee is parabolic, peaking at p=0.50 and dropping sharply near the extremes. This was explicitly designed to kill latency arbitrage on these fast markets.

Fee Calculator

def calculate_fee(price: float, size: float, base_rate: float = 0.063) -> dict:
    """Calculate dynamic taker fee for crypto short-duration markets."""
    fee_rate = base_rate * min(price, 1 - price)
    fee_amount = fee_rate * size
    cost_basis = price * size
    total_cost = cost_basis + fee_amount
    effective_rate = fee_amount / cost_basis if cost_basis > 0 else 0

    return {
        "fee_rate": fee_rate,
        "fee_amount": fee_amount,
        "cost_basis": cost_basis,
        "total_cost": total_cost,
        "effective_rate_pct": effective_rate * 100,
    }

Breakeven Analysis for Arbitrage

For an arbitrage trade buying both YES and NO:

def arbitrage_breakeven(yes_price, no_price, base_rate=0.063):
    """Calculate if arb is profitable after fees on fee-bearing markets."""
    raw_sum = yes_price + no_price
    raw_edge = 1.0 - raw_sum  # Positive = underpriced

    yes_fee = base_rate * min(yes_price, 1 - yes_price)
    no_fee = base_rate * min(no_price, 1 - no_price)
    total_fee_rate = yes_fee + no_fee

    net_profit_per_share = raw_edge - total_fee_rate
    return {
        "raw_edge": raw_edge,
        "total_fee_rate": total_fee_rate,
        "net_profit_per_share": net_profit_per_share,
        "profitable": net_profit_per_share > 0,
    }

Maker Rebates

Post-only limit orders (introduced January 2026) receive maker rebates on qualifying markets. This creates a structural advantage for market-making strategies that provide liquidity.

Practical Implications

1. Fee-free markets: Arbitrage edges as small as $0.01 are worth capturing
2. Fee-bearing markets: Need at least 3-6% raw edge at mid-prices to break even
3. Extreme prices (< 0.10 or > 0.90): Fees are minimal even on fee-bearing markets
4. Market making: Maker rebates make spread-capture profitable on thin books