A new study has revealed that bot-like bettors exploited nearly $40 million in profits through arbitrage trading across the Polymarket trading platform. Politically related wagers were the most exploited compared to sports betting, especially the 2024 U.S. elections. The study revealed how a small number of highly active participants could generate risk-free returns at the expense of other gamblers.
Oriol Saguillo, Vahid Ghafouri, Lucianna Kiffer, and Guillermo Suarez of IMDEA Networks Institute published the research study on August 5 on the open-access repository arXiv. They scanned through 86 million bets placed across multiple markets between April 2024 and April 2025. Their study, despite not yet being peer reviewed, sheds light on the scale of arbitrage trading across decentralized betting ecosystems
IMDEA Networks Institute research shows the top three Polymarket gamblers netted nearly $4.2 million
According to the study, the top three wallets that participated in the trade placed more than 10,200 bets throughout the year. The wallets netted approximately $4.2 million in profits. The study suggested that many of the participants relied on automated programs to rake in such profits by exploiting mispriced bets.
Polymarket, unlike other betting sites, uses market forces to determine odds for outcomes rather than the platform itself. The site’s model creates an open and transparent price discovery and is decentralized. According to the research, the model leaves a loophole for arbitrage traders to exploit mispriced wagers, which traditional betting firms actively sought to prevent.
Across Polymarket, gamblers can buy shares against future outcomes priced between $0.01 and $1, which corresponds to 1% to 100%. The price reflects the implied probability of an event occurring. Overall, the sum of all potential outcomes in an event should amount to 100%. According to the study, this is not always the case; due to short-term fluctuations, the total odds may rise above or below the 100% threshold, which opens a loophole for risk-free trades. The extra margin created opens the door for arbitrage trading.
The study outlined two distinct types of arbitrage trades. The first type highlighted a single market, where mismatched probabilities allow gamblers to profit by buying or selling opposing outcomes. The second highlighted type involved multiple markets where the result of one preliminary event influences another related market.
IMDEA Network Institute uncovered that political prediction markets, especially the 2024 U.S. elections, contributed the largest portion of the arbitrage profits. According to an analysis by Dune Analytics, monthly betting volume during the election across Polymarket exceeded $2.6 billion, which created a perfect opportunity for arbitrage strategies.
Study shows politically related bets were the most exploited on Polymarket
Sports markets generated more arbitrage opportunities in general, but with smaller potential for profits overall. According to the study, political wagers generated more cash compared to sports. The study revealed that most arbitrage trades generated gains between 1% to 5%. It added that extreme inefficiencies that delivered outsized profits were rare across the platform. One noted extreme event showed one participant placing $0.02 of yes and no shares in the same market, which generated nearly $59,000.
The research acknowledged that such a phenomenon arose when they were mismatched with real-world probabilities. It added that such a phenomenon created a rare discrepancy for gamblers to exploit. The study noted that there could be other forms of arbitrage currently ongoing. It cited a scenario where a semi-final match could influence follow-up markets, creating opportunities for more complex strategies.
The analysis suggested that as platforms like Polymarket continue to grow in popularity, the arbitrage market strategies will also continue to grow. A comparison was drawn from DeFi, where arbitrageurs have already developed advanced tools for market-making strategies. The study revealed how blockchain prediction markets remain vulnerable to exploits by a small group of skilled traders. The revelation has sparked questions about the long-term sustainability of the platform as participants continue to turn to automated methods.
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Source: https://www.cryptopolitan.com/research-reveals-40-m-exploit-polymarket/
