Polymarket and prediction markets compared to traditional betting

Prediction markets, such as the decentralized platform Polymarket, offer a different economic structure compared to traditional sportsbooks and betting exchanges. Unlike traditional bookmakers that act as market makers and profit from a spread or vigorish, prediction markets allow participants to trade contracts based on binary outcomes, such as “Yes” or “No” answers to specific questions regarding elections, economics, or sports.

Polymarket operates on the Polygon blockchain, allowing retail and professional traders to price outcomes directly against each other. This mechanism can result in lower fees and better odds discovery. For example, while traditional sportsbooks typically retain a 4% to 5% margin, Polymarket utilizes a taker fee structure ranging from $1.00 to $1.75 per 100 shares on international markets, with no fees for makers providing liquidity.

In contrast, betting exchanges function by matching individuals taking opposing sides of a bet. This allows participants to either “back” an outcome (betting it will happen) or “lay” an outcome (betting it will not happen), rather than simply accepting the odds set by a centralized house.