Prediction Markets vs Betting Exchanges
Both match you against other traders, not a bookmaker — so the engine is the same. What differs is the packaging: an exchange quotes decimal odds and takes a flat commission on winnings; a prediction market quotes cents per share and takes a price-dependent fee at the moment you trade. That fee difference, plus USD settlement, is what actually changes your arbitrage maths.
The one thing they share
This is worth stating plainly, because most explanations get it backwards. A prediction market is not a new kind of bookmaker. Like a betting exchange, it is an order book: your counterparty is another person who took the other side, and the platform's job is matching, not risk-taking.
Because the engine is shared, everything you know about back and lay carries over. Selling a share is laying. The rest of this page is about the eight places where they genuinely diverge.
Side by side
| Betting exchange Betfair, Laystars, OrbitX |
Prediction market Polymarket, Kalshi |
|
|---|---|---|
| Counterparty | Another trader, via an order book | Another trader, via an order book |
| Vocabulary | Back / lay, stake, liability | Buy / sell, shares, risk |
| Pricing unit | Decimal odds (e.g. 3.00) | Cents per share (e.g. 33¢) |
| Fee model | Flat % of net winnings — only when you win | coef × shares × P × (1 − P) on notional — charged at trade time |
| Typical rate | 2–5% commission | Kalshi 0.07 · Polymarket sports 0.05 (taker) |
| Fee when you lose | Nothing | Still paid — it was taken up front |
| Currency | EUR / GBP | USD (Kalshi) · USDC (Polymarket) |
| Event coverage | Sport only | Sport, politics, economics, weather, culture |
| Liquidity shape | Deep across football and tennis, including in-play | Very deep on headline markets, thin on the long tail |
| Regulation | Gambling licence in the markets served | Event-contract / derivatives regime, or offshore |
1. The fee difference is the one that costs you money
Everything else on that table is cosmetic by comparison. Two structural facts about prediction-market fees change how you evaluate a row:
You pay whether or not you win. Exchange commission comes out of winnings — lose the lay and you pay nothing. A taker fee is deducted from the trade itself, so it is a certain cost against an uncertain return. In an arbitrage that's fine (you've covered both sides), but it means the fee must come out of the margin, always.
The fee is worst where arbitrage lives. The P × (1 − P) term peaks at 0.25 when the price is 50¢ and shrinks towards zero at 1¢ and 99¢:
| Share price | P × (1 − P) | Kalshi fee / 100 shares | Polymarket sports / 100 |
|---|---|---|---|
| 10¢ | 0.09 | $0.63 | $0.45 |
| 25¢ | 0.1875 | $1.31 | $0.94 |
| 50¢ | 0.25 | $1.75 | $1.25 |
| 75¢ | 0.1875 | $1.31 | $0.94 |
| 90¢ | 0.09 | $0.63 | $0.45 |
The practical rule
Near even money, an exchange is usually cheaper. On longshots and heavy favourites, a prediction market is often cheaper — sometimes dramatically. Since most arbitrage clusters near even money, treat the exchange as your default and the prediction market as the venue you check when the price is extreme.
2. Maker orders change the answer
The figures above are taker fees — what you pay to hit an existing order and fill immediately. Rest a limit order instead and you are a maker, and on both venues makers generally pay less or nothing.
That sounds like free money and mostly isn't, for arbitrage specifically: an arb requires both legs filled before the price moves. A resting order that never fills leaves you with one naked leg, which is the single most expensive mistake in this game. Take the fee and get filled.
3. You are also holding a currency position
Your bookmaker leg is in euros. Your prediction-market leg is in dollars. Between placing and settling, EUR/USD moves — and on a 1–2% margin, so does your profit.
ArbPlay converts prediction-market odds and sizes to EUR and shows the USD original in brackets, so the row is comparable to every other row. But the exposure doesn't disappear because it's displayed in euros. On a large or slow-settling position, it is worth thinking about.
4. Liquidity is shaped differently
A betting exchange spreads reasonable depth across a huge number of football and tennis markets, including in-play. A prediction market concentrates enormous depth on a small number of headline markets and can be very thin elsewhere.
For arbitrage this means: check the available size before you plan the stake, not after. A 3% margin on €40 of available liquidity is a €1.20 opportunity, and it will take you longer to place than it's worth.
5. Regulation and availability are not the same question
Betting exchanges hold gambling licences in the markets they serve. Prediction markets typically operate under an event-contract or derivatives regime, or offshore — a genuinely different legal category, not a lighter version of the same one.
The practical consequence is that availability varies by country and changes. Both venues maintain their own restricted-jurisdiction lists and both require identity verification before you can deposit or trade.
Check this yourself
Before you plan around either venue, read its own current terms for your country of residence and confirm you can complete KYC. Third-party country lists — including any you find on this site — go stale. The venue's own terms are the only source that counts.
So which should you use?
The honest answer is both, chosen per row, which is exactly why ArbPlay lets you switch the lay side between Laystars, Betfair, OrbitX, Polymarket and Kalshi and recomputes the profit for the venue you picked.
- Exchange when the price is near even money, when you want EUR settlement, or when you need in-play depth.
- Prediction market when the price is extreme enough that the
P × (1 − P)fee is small, when the exchange has no market for the event, or when the edge is simply bigger there.
FAQ
What is the main difference between a prediction market and a betting exchange?
Both match you against other traders rather than a bookmaker, so the core mechanism is the same. The differences are in the packaging: a betting exchange quotes decimal odds and charges a flat commission on net winnings, while a prediction market quotes share prices in cents and charges a price-dependent taker fee at the moment you trade. A prediction market also covers politics, economics and weather, not just sport.
Is laying on Betfair the same as selling shares on Polymarket?
The position is identical. Selling N shares at price P risks N × (1 − P), exactly like laying a stake of N × P at decimal odds of 1 / P. What differs is when and how you are charged: the exchange takes commission from your winnings after the event, the prediction market takes its taker fee from your notional at the moment of the trade.
Which is cheaper for arbitrage, a prediction market or a betting exchange?
It depends on the price. Prediction-market fees peak near 50 cents and fall towards zero at the extremes, so a longshot is often cheaper on a prediction market and an even-money market is usually cheaper on an exchange. Because arbitrage frequently sits near even money, exchange commission is the cheaper default more often than not — but you should compute both, per row.
Are prediction markets regulated like bookmakers?
No. Betting exchanges hold gambling licences in the jurisdictions they serve. Prediction markets are generally regulated as derivatives or event-contract venues, or operate offshore, and each maintains its own list of restricted countries plus mandatory identity verification. Always check the venue's current terms for your country of residence before depositing.
Related: What are prediction markets · Arbitrage with prediction markets · Back & lay explained · all guides.