There is a pricing bias on Polymarket, and arbitrageurs make more than $40 million in one year

PANews reported on September 18 that according to Decrypt, a new academic paper pointed out that there is a systematic pricing bias in the prediction market platform Polymarket, and arbitrageurs make more than $40 million in a year. This paper, titled "Unlocking the Forest of Probability: Predicting Arbitrage Opportunities in the Market", analyzed data from April 2024 to April 2025 and found that more than 7,000 markets had pricing errors. The study points out two main arbitrage models: one is that the sum of the "yes/no" shares in the same market deviates from the theoretical value of 1 US dollar; the other is that there is a probability deviation between logically related markets (such as "Trump's victory" and "Republican victory"). Through the simultaneous trading agreement, traders can achieve risk-free returns. Although arbitrage activity will eventually make market prices return effective, research shows that pricing biases can last for hours. This phenomenon not only exists on Polymarket, but also on regulated platforms such as Kalshi.