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Trading Fees

Trading fees are the costs charged by a prediction market exchange for executing a trade, typically expressed as a percentage of the contract value or a per-contract cent amount. They represent the primary revenue mechanism for regulated platforms and directly reduce a trader's net returns.

Updated June 25, 2026Market Mechanics
TL;DR
Trading fees are what the exchange charges you to execute a trade. On prediction markets, fees are typically higher near the 50-cent midpoint and lower on near-certain outcomes, and makers almost always pay less than takers.

Key Points

✓On [[kalshi]], the taker fee formula is 7 cents multiplied by C multiplied by (1 minus C) per contract, where C is the contract price; maker fees are 25% of that amount.
✓On [[polymarket]], taker fees range from 3 to 7 cents per contract depending on market category; makers pay zero and receive daily rebates.
✓Fees peak at the 50-cent midpoint of a [[binary-market]] (1.75 cents per contract on Kalshi at 50 cents) and approach zero at the extremes.
✓The [[maker-taker]] model means [[limit-order]] makers pay far less than [[market-order]] takers, rewarding patient [[liquidity]] provision.
✓High cumulative fees can eliminate [[edge]] on low-margin trades; always calculate fee-adjusted [[expected-value]] before entering a [[position]].

How Prediction Market Fee Structures Work

Unlike traditional sportsbooks that embed their margin in an Overround, regulated prediction market exchanges like Kalshi charge explicit per-trade fees. The Kalshi probability-weighted formula means fees scale with uncertainty: a contract at 5 cents (very likely NO) costs 0.33 cents per contract in taker fees, while the same contract at 50 cents costs 1.75 cents. This design rewards high-conviction trades over speculative long-shot bets on already-cheap contracts. Polymarket uses flat-rate taker fees by market category: crypto markets carry a 7-cent fee, sports 3 cents, and most other categories 4 to 5 cents. In both cases, the Maker and Taker distinction is critical: qualifying as a maker by placing Limit Order resting quotes cuts your fee to a fraction of the taker rate.

Fee Impact on Trading Strategy

Trading fees must be treated as a direct deduction from Expected Value. If your model says a 50-cent contract is actually worth 54 cents, your gross Edge is 4 cents per contract. After a 1.75-cent taker fee on Kalshi, your net edge is 2.25 cents. Round-trip costs matter even more: buying at 50 cents and selling later at 54 cents costs fees on both legs. Strategies that involve frequent entry and exit, such as Momentum Trading or rapid Arbitrage, are especially sensitive to fee levels. Using Limit Order placements to earn maker status, choosing markets with lower fee tiers, and sizing positions according to Kelly Criterion to maximize compounding net of fees are all standard tools for managing fee drag on Polymarket and Kalshi.

Related Terms

Maker and Taker
The maker-taker model is a fee structure used by prediction market exchanges that charges different rates based on whether an order adds liquidity to the order book (maker) or removes it (taker). Makers place resting limit orders; takers fill those orders with market or aggressive limit orders.
Expected Value
Expected value (EV) is the probability-weighted average outcome of a trade, calculated by multiplying each possible payout by its estimated probability and summing the results. A positive EV trade is one where the anticipated return exceeds the cost over the long run.
Edge
Edge is the measurable advantage a trader holds over the market price of a contract, arising when an independent probability estimate differs favorably from the [[implied-probability]] reflected in the current price.
Limit Order
A limit order is an instruction to buy or sell a prediction market contract at a specific price or better, resting on the order book until a counterparty matches it or the order is cancelled. Unlike a market order, it guarantees a price but not an immediate fill.
Kalshi
Kalshi is a US-based prediction market exchange regulated by the CFTC as a Designated Contract Market, allowing traders to buy and sell event contracts on real-world outcomes. It was the first exchange to receive CFTC approval specifically for event contracts, launching its first markets in 2021.
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