Original author: Pix
Original translation: Luffy, Foresight News
Most people gamble on prediction markets, I arbitrage on prediction markets. Here is my specific strategy for making $100,000 from decentralized, inefficient prediction markets.
Step 1: Understand the rules of the game
Prediction markets allow you to bet on the outcomes of real-world events, such as:
“Will Ethereum reach $5,000 by the end of the year?”
“Will MrBeast run for president?”
“Will Kanye West issue a token?”
Each market has different user groups, each with their own biases. This means that the same event will be priced differently on different platforms, and this is where the opportunity lies.
Example: If platform A’s “yes” quote is $0.4 and platform B’s “no” quote is $0.55, then no matter what the result is, you can lock in a profit of $0.05, which is arbitrage.
Step 2: Find your strengths
The strategy that works best for me is in multiple outcome markets, which are most prone to mispricing.
Example:
Who will win F1 this weekend?
Which party will win the UK election?
Who will be eliminated next from Love Island?
Theoretically, the sum of the probabilities of all outcomes should be 100%, but in reality the sum often reaches 110%.
Reason: Platforms often charge hidden fees (“excess premiums”) and the odds are determined by users, leading to a lot of inefficient pricing.
Step 3: How to determine if there is an arbitrage opportunity
Core rules:
Find the same event on different platforms;
Select the lowest price for each result;
If the total price is less than 1 USD, arbitrage is possible.
Real Case: Who will be the next Pope?
The quotes for the two platforms are as follows:
The strategy is to buy all outcomes, one of which must come true, which guarantees $1. The profit per trade is $0.021 (2.1% risk-free return), which is arbitrage. You are not betting on who will become the pope, but on the two platforms not being able to agree on who will become the pope. And when they disagree, you make money.
Myriad has much less liquidity, but there are two other sites with closer spreads. If you focus on more markets, you will find greater advantages.
I usually only do arbitrage when the APY is above 60% (APY = (Spread / Settlement Days) × 365).
In this example, the event ends after 29 days:
(0.021 / 29) × 365 ≈ 26.4% APY (below my threshold of 60%, give up).
If the event ends after 7 days:
( 0.021 / 7) × 365 ≈ 109.5% APY (enter the market decisively).
Step 4: Race against time
Prediction Market Arbitrage is a Latency Game:
Once a price difference occurs, there is usually only a window of a few minutes, not hours; the spread of rumors, delayed platform updates, etc. will cause price differences, and your advantage only exists during this period of time.
Automate this part if you can, use price alerts on Discord, Telegram and Twitter. Sometimes I can spot a spread just by muscle memory. The faster you act, the more you make. Hesitate for 5 minutes and the spread is gone. The best spread Ive ever taken was 18%, which was a pretty good profit.
It is important to ensure that each platform has available funds and is clear about the handling fees.
Step 5: Exit early
Most people wait for the results to be known, but I took profits before the results were clear.
Lets say I buy all the results at $0.94, so I have a $0.06 spread. I dont need to wait for the results, if the market tightens I can sell at $0.98 or $0.99 and Ill be out.
This can significantly increase APY and quickly switch to the next market.
Additional Tips
Look for overlapping events: For example, there may be hidden arbitrage between Trump wins the 2024 election and Republican victory;
Targeting a small market: more pricing errors, less competition;
Using niche platforms: wider price spreads and possible airdrop rewards;
Read the settlement rules carefully: one word may change the outcome;
Verify carefully: confirm the order book, transaction price, and include all fees in the calculation.
Summarize
I made $100,000 in more than two months, during which there were both quiet and busy days. The greater the volatility, the greater the spread, but even if the market is calm, there is always the next inefficient market waiting to be discovered.
