How Prediction Markets
Make Money
Understanding how a prediction market platform earns revenue tells you a lot about its incentives: and directly affects your net returns. The five major platforms use five different fee models: profit-only fees, per-trade taker fees, withdrawal fees, bid-ask spread capture, and investor subsidy. This guide explains each model and what it means for your trades.
Fee models compared
Kalshi: profit fee — only on winning trades
Kalshi charges a profit fee of 0–7% of net profit, but only on winning contracts. If your trade expires worthless, you pay nothing to Kalshi. This structure aligns Kalshi's revenue with traders' success: Kalshi makes more when traders win more.
You buy YES at $0.40. Contract resolves YES at $1.00. Gross profit: $0.60 per contract. Kalshi's fee (e.g., 7%) is applied to the $0.60 profit: $0.042 fee. Net to you: $0.558 per contract. You pay no fee on the original $0.40 stake.
If you lose a trade, you pay no fee at all. On a 40% win rate strategy, you only pay fees on 40% of your trades. Compared to a flat taker fee on every trade, profit-only fee is better for traders who lose more often than they win, which is most traders on hard-to-predict markets.
Kalshi's fee rate varies by contract type and liquidity tier: the full schedule is available on kalshi.com/fees. The fee is already deducted from your payout; the 1099-MISC Kalshi issues reflects net profit after fees.
Polymarket: taker fee on every trade
Polymarket charges approximately 2% on each trade as a taker fee, regardless of whether you win or lose the underlying contract. This is charged when you trade against the orderbook (take liquidity). Makers who post limit orders may pay a lower fee.
Example: You buy $500 of YES contracts at $0.50 (1,000 contracts). Taker fee: ~$10 (2% of $500). You then sell at $0.70: proceeds $700, fee ~$14. Total fees: $24 on a $200 gross profit = 12% of gross profit eaten by fees. Polymarket's per-trade fee compounds on active traders, especially in markets where you buy and sell before resolution.
For buy-and-hold traders who enter a contract once and hold to resolution, Polymarket's effective fee is lower (one trade in, settlement at $1.00 or $0.00 with no selling fee). For active traders who buy and sell frequently, the 2% per-trade model accumulates.
PredictIt: the highest fee structure in the market
PredictIt charges 5% of net profits on winning contracts plus a 10% fee on all cash withdrawals. The dual-fee model (profit tax plus exit tax) is the highest explicit fee structure among regulated US prediction markets.
On a $1,000 net profit, PredictIt takes $50. This is applied per winning trade: not per market or per year. It adds up quickly for active traders with many small positions.
Every time you withdraw from PredictIt, 10% of the withdrawal amount is taken. Withdraw $1,000, receive $900. This is in addition to the profit fee, creating a double-fee situation for traders who both win and cash out.
PredictIt's fee structure has been criticized as trader-unfriendly. The trade-off is platform-specific access: PredictIt has some of the most granular US political markets (individual congressional races, state-level primary markets) that don't exist on Kalshi or Polymarket. If you're trading politics-only, the fee is the price of access to that market depth.
Total cost on a $1,000 winning trade
Scenario: You invest $1,000, contract resolves in your favor, gross profit = $1,000 (100% return). You then withdraw your $2,000 total. What does each platform take?
| Platform | Profit fee | Withdrawal fee | Total cost | Net received |
|---|---|---|---|---|
| Kalshi | $70 (7% of $1,000 profit) | $0 | $70 | $1,930 |
| Polymarket | $20 (2% of $1,000 trade) | $0 | $20 | $1,980 |
| Robinhood | ~$40 (2,000 × $0.02) | $0 | $40 | $1,960 |
| PredictIt | $50 (5% of $1,000 profit) | $195 (10% of $1,950) | $245 | $1,755 |
| ForecastEx/IB | $0 (spread-based) | $0 | ~$5–15 (spread) | ~$1,985 |
Note: Kalshi's 7% is the maximum profit fee rate; actual rate depends on contract type. Polymarket's 2% is the taker fee: maker orders may be lower. All figures approximate.
How fee models affect your trading strategy
If you buy a contract and hold it to resolution, you only pay fees once. Kalshi's profit fee only applies if you win: zero cost on losers. Polymarket's taker fee applies on entry only. Both are reasonable for long-term position holders.
If you trade in and out of positions, Polymarket's 2% per-trade model compounds quickly. A trader who enters and exits 10 times pays 20% in fees. Kalshi's profit fee doesn't compound in the same way since it's only on net profit.
If you're making many small bets with a low win rate (typical for long-shot political markets), Kalshi's profit-only fee means you pay $0 on all your losers. Polymarket charges 2% on every losing trade. Kalshi is structurally better for this trading style.
PredictIt's granular market depth may justify its fees if you have genuine edge in niche congressional and state-level races that don't exist on Kalshi. For general political markets, Kalshi's fee model is significantly more favorable than PredictIt's 5% + 10% structure.
Common questions about prediction market fees
How do prediction markets make money? +
Each platform uses a different model. Kalshi: profit fee (0–7% of net profit on winning trades only). Polymarket: ~2% taker fee per trade. PredictIt: 5% of profits + 10% withdrawal fee. Robinhood: $0.01 + $0.01 per contract. ForecastEx/IB: bid-ask spread (no explicit commission). Manifold: venture-funded for play money; 5% cashout fee on sweepstake prizes.
Which prediction market has the lowest fees for US traders? +
It depends on your trading style. For buy-and-hold traders with sub-50% win rates: Kalshi (profit fee only on winners). For active traders on liquid markets: ForecastEx/IB (spread-only, no explicit fee). Polymarket is competitive for single-entry hold-to-resolution trades. PredictIt is the most expensive for active traders due to the dual 5% + 10% fee structure.
Does Kalshi's fee affect my 1099-MISC? +
No: Kalshi's 1099-MISC reports net profit after fees. You don't separately deduct fees; they're already factored into the taxable amount Kalshi reports to the IRS.
Do prediction market platforms charge deposit or withdrawal fees? +
Kalshi: no deposit or withdrawal fees for standard ACH. Polymarket QCEX: no withdrawal fees via ACH back to bank; crypto gas fees apply if withdrawing USDC. PredictIt: 10% withdrawal fee on all cash-outs: a significant cost to factor in. Robinhood: no fees (prediction markets are part of the standard Robinhood account).
More guides on costs and platforms
Compare all platforms
Head-to-head comparisons of every major US prediction market platform: fees, regulation, liquidity, and access.
TaxesPrediction market taxes
How platform fees interact with your tax obligations: net profit reporting, 1099s, and the OBBBA exemption.
EducationalHow prediction markets work
From implied probability to orderbooks: the complete beginner's guide to prediction market mechanics.