Many prediction market traders struggle to understand the different event trading fees when using the various regulated trading platforms.
If you are one of those traders who need help, we have compiled this guide to unpack the relevant trading costs.
Generally, prediction market fees are grouped into two categories: trading fees and non-trading fees.
Trading fees include the exchange fees for buying and selling contracts, as well as slippage. Non-trading fees are account management costs, such as deposit and withdrawal fees.
Keep reading to learn more about these fees and why you should factor in the fees when buying and selling contracts.
When we compiled our prediction markets vs sportsbooks: what’s the difference guide, we mentioned that prediction markets are exchanges where you can trade on the outcome of future events, such as sports and election results.
All trades are in the form of binary outcomes (yes or no) and range from $0 to $1. Winning trades are paid out at $1, while losing trades are $0.
Since prediction markets do not have fixed odds and these exchanges do not set their own contracts, you need to know how to read market prices as probabilities.
Remember that the value of each contract is based on the trades made by other traders on the likelihood of an event occurring.
For example, if a contract has Doctors Without Borders winning the Nobel Peace Prize at $0.20, that means the traders predict there is a 20% probability that the Doctors Without Borders will win the Nobel Peace Prize.
Here are some of the most frequently asked questions about event trading fees:
Yes, prediction markets are legal in the US, provided that the exchange is regulated by the Commodity Futures Trading Commission (CFTC). The CFTC oversees and regulates the derivatives market, and you should only buy and sell contracts at CFTC-regulated prediction market sites.
Prediction markets do not provide event betting. When we shared our what is event betting guide, we explained that when using prediction markets, you make predictions on the outcomes of future events, including sports and election results, by buying and selling contracts.
Prediction market fees include trading and non-trading fees. Trading fees cover exchange fees for buying and selling contracts, as well as slippage. Non-trading costs include account and banking fees.
The costs of event trading cover two broad categories: event trading costs and non-trading costs. Non-trading fees include deposit and withdrawal fees, as well as costs associated with dormant accounts.
These fees are not fixed, and some exchanges have non-trading fees, while others do not charge users a banking/account fee.
If you have read our Kalshi vs Polymarket – which app is better guide, you will know that exchange fees or trading fees are incurred at the discretion of the exchange.
For example, Polymarket does not charge any trading fees, whereas Kalshi does charge trading fees when buying and selling contracts.
Besides exchange fees for buying and selling contracts, another trading fee is slippage. When entering a trade, it is important to consider slippage. S
lippage refers to the change in the price of a trade from the time a contract is placed to the time the trade is executed. Slippage can occur due to various factors, such as an imbalance between supply and demand, market volatility, low liquidity, and internet connection issues.
Slippage tolerance refers to the predetermined number of points (expressed as a dollar value) that a trader is comfortable with deviating from the trade price at the time the contract was placed when buying or selling a contract.
Slippage tolerance is important if you want to mitigate your losses, especially when purchasing a volatile contract where the price can change by $0.10 in a second. If your slippage tolerance is set to $0.05, the contract will not be purchased.
| Prediction market fees | Types |
|---|---|
| Event trading fees |
|
| Non-trading fees |
|
Depending on the exchange you are using, the full cost of event trading will include the exchange fee, the contract price and the slippage tolerance. Below is an example of how the total cost is calculated and how you need to factor these costs when trading at prediction markets.
If you believe the Philadelphia Eagles will win the NFC, and the current probability of the Eagles winning their conference is 85%. Should a trader set their slippage tolerance to $0.05 per contract, then the amount needed to purchase ten contracts can be calculated as:
= (Contract Price + Exchange Fee + Slippage Tolerance) x No. of Contracts
= ($0.85 + $0.01 + $0.05) x 10
= $9.10
Instead of paying $8.60 for the ten contracts (including exchange fees), a trader will likely have to pay an extra $0.50 due to slippage.
Trading on the outcome of real-world events is simple at prediction markets, but you must double-check the full costs of event trading.
While the event trading fees must be factored before buying and selling contracts, a common mistake that some traders make is forgetting about non-trading fees, and these account and banking costs are important factors to consider when using prediction sites.
The prediction sites shared on this page have a mix of trading and non-trading fees. Before clicking the banners on this page to sign up, read the terms of service and diarize the relevant fees.
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