A recent study has highlighted how a select group of bettors amassed close to $40 million through arbitrage strategies on the blockchain-based predictions platform, Polymarket. Conducted by researchers from the IMDEA Networks Institute, including Oriol Saguillo, Vahid Ghafouri, Lucianna Kiffer, and Guillermo Suarez, the analysis examined 86 million bets placed between April 2024 and April 2025.
The researchers discovered that wagers linked to the 2024 U.S. elections were particularly lucrative, surpassing profits typically seen in sports betting. The study, which has yet to undergo peer review, provides a comprehensive look at the scale of arbitrage occurring in decentralized prediction markets.
Automated Strategies Lead to Significant Profits
The study indicated that the top three wallets involved in trading placed over 10,200 bets, generating approximately $4.2 million in profits. Many of these accounts utilized automated programs, or bots, to identify and act on arbitrage opportunities, allowing for consistent, low-risk gains. Unlike traditional sportsbooks, where oddsmakers set prices, Polymarket relies on traders to determine probabilities by buying and selling outcome shares valued between $0.01 and $1.
In theory, the total probabilities across all possible outcomes should equal 100%. However, the study noted that fluctuations occasionally pushed these totals above 100%, creating opportunities for traders to capitalize on price discrepancies. The researchers concluded that traders exploited these mismatches, using both simple and advanced strategies that linked related markets, with political wagers proving the most profitable.
Record Trading Volumes and Extreme Profits
During the election period, Dune Analytics reported that Polymarket’s trading volume peaked at over $2.6 billion per month. This surge facilitated arbitrage strategies, yielding gains between 1% and 5%. There were instances of extreme mispricings, including one trader who turned an investment of $0.02 into nearly $59,000.
The authors of the study concluded that blockchain prediction markets are likely to remain vulnerable to arbitrage strategies, similar to existing decentralized finance platforms where such practices are already prevalent. This research sheds light on the evolving landscape of prediction markets and the potential for significant financial opportunities for skilled bettors.
