Market making on Polymarket
A market maker posts buy and sell limit orders on both sides of a market and earns the spread, plus Polymarket's maker rebates and liquidity rewards. The catch is inventory risk and adverse selection: you tend to get filled exactly when the price is about to move against you.
What market making is
A market maker quotes a bid and an ask at the same time, for example buying YES at 47¢ and selling YES at 51¢. If both fill, they make 4¢ per share without having a view on the outcome. Because these are resting limit orders, they are maker orders: Polymarket charges makers no fee, and they can earn rebates and rewards on top. Every trader who uses a market order is paying them.
On Polymarket you can also create inventory directly: splitting 1 pUSD gives you one YES and one NO share, and merging a YES and a NO returns 1 pUSD. Professional makers use this to stay flexible on both sides.
Where the money comes from
- The spread. The difference between your buy and sell prices, earned only when both sides fill.
- Maker rebates. Each day Polymarket shares a portion of taker fees with makers whose orders were filled: 20% in crypto, 15% in sports and 25% in finance, politics, economics, culture, weather, tech, mentions and other markets. Your share depends on your “fee equivalent” (shares × feeRate × price × (1 − price)) compared with all other makers in the same market. Payouts are daily in pUSD, with a $1 minimum. Geopolitics markets are fee-free, so there is no rebate.
- Liquidity rewards. Separately, some markets pay rewards for keeping orders on the book even if they don't fill. Each market sets a maximum spread, a minimum size and a daily reward budget. Orders closer to the midpoint score more, and two-sided quoting scores much better than one-sided. Details are on our liquidity rewards page.
The risks
Inventory risk
Fills rarely come in matching pairs. If sellers keep hitting your bid, you end up holding a large YES position you never wanted. When the market resolves, that is a directional bet that pays $1 or $0. Makers manage this by skewing quotes (lowering both prices when long), capping position size, and merging matched YES and NO back into pUSD.
Adverse selection
The traders most eager to hit your quote are often those who know something: a goal was just scored, a poll just came out, a court ruling just dropped. Your stale order fills at the old price and you lose more on that trade than you earn on dozens of normal ones. This is the main reason amateur market makers lose money.
Jump risk at resolution
Prediction market prices don't drift; they jump to 0 or 100. A resting bid on the losing outcome right before the news can fill at a price that becomes worthless seconds later. Polymarket's own documentation recommends cancelling and replacing quotes when conditions change, using orders that expire before known events, and keeping a kill switch that cancels everything.
Ready to try it? Check it is available where you live, then open Polymarket.
Open PolymarketA simple example
You quote 45¢ bid / 49¢ ask for 500 shares in a quiet politics market. Over a week, 400 shares fill on each side: 4¢ × 400 = $16 of spread. Your fee equivalent on those 800 maker fills is roughly 800 × 0.04 × 0.47 × 0.53 ≈ $8, and if you were the only maker, 25% of that, about $2, comes back as a rebate. Then a news story pushes the price to 30¢ and 500 of your bids fill on the way down before you cancel. You are now long 500 shares bought at 45¢ and worth 30¢: a $75 loss that wipes out several weeks of spread. That asymmetry is the whole game.
Why it is hard for individuals
- Speed. Competitive makers run bots on the API, react in milliseconds and cancel before news hits the website. Manual quotes go stale.
- Competition for rebates. Rebates and rewards are split among all makers in a market. In busy markets your share is small.
- Capital. Quoting both sides ties up money in each market, and rewards scale with size.
- Operational risk. A bug, a lost connection or a bad price input can fill orders you did not intend. Never run a bot you didn't write or audit, and never give anyone your private key.
A practical version for normal traders
You don't need to run a full book to benefit. Use limit orders for the trades you already want to make, set them a cent or two better than the current best bid or ask, and let others come to you. You pay no fee, may collect a small rebate, and avoid the spread. Cancel resting orders before scheduled news. See limit orders and maker rebates.
Frequently asked questions
Do Polymarket market makers pay fees?
No. Maker orders pay no fee in any category and can earn daily maker rebates in fee-charging markets.
Can I make money market making on Polymarket by hand?
It is possible in quiet markets but difficult. Adverse selection from news and faster bots usually outweighs the spread for manual traders.
What is the difference between maker rebates and liquidity rewards?
Maker rebates are paid on orders that actually fill, funded by taker fees. Liquidity rewards are paid for keeping qualifying orders on the book in selected markets, whether or not they fill.