Research reveals systematic pricing bias in forecasting market

A recent academic paper highlights the systematic pricing bias of the forecast market platform Polymarket, which has allowed arbitrageurs to make more than $40 million in a year. This paper, titled "Unvest the Forest of Probability: Predicting Arbitrage Opportunities in Markets", analyzed data from April 2024 to April 2025 and found pricing biases in more than 7,000 markets. The study outlines two main arbitrage strategies: first, the deviation between the sum of the “yes/no” stock prices in the same market and the theoretical value of $1; second, probability differences in logically related markets such as “Trump wins” and “Republican wins.” Traders can obtain risk-free profits by buying and selling related contracts at the same time. While arbitrage activity will eventually lead to market price adjustments, research shows that pricing biases may last for hours. This phenomenon is not unique to Polymarket and has also been observed in regulated platforms such as Kalshi.