How Prediction Market Fees Eat Your Edge
A detailed breakdown of fee structures on Kalshi and Polymarket, and how they silently destroy your expected value on trades that look profitable.
The edge that wasn't
You find a Kalshi contract trading at $0.60. You believe the true probability is 70%. That's a 10-cent edge — buy all day, right?
Not so fast. Kalshi charges roughly 7% on profits from winning trades. If the contract resolves Yes, your $0.40 profit gets taxed $0.028. If it resolves No, you lose your full $0.60 with no fee offset. After fees, your expected value drops from +$0.10 per contract to about +$0.072.
That's a 28% reduction in your edge. On tighter margins, fees can flip a +EV trade to -EV entirely.
How each platform charges
Kalshi
Kalshi's fee model charges a percentage of profit on winning trades only. The asymmetry matters: you eat full losses but share your wins. On a contract bought at $0.50 with a 7% winner fee, your break-even true probability isn't 50% — it's roughly 51.8%. Run it through the break-even calculator to see exactly how much the fee shifts the line.
The fee hits hardest on high-probability contracts. Buying at $0.90 means your max profit is $0.10. A 7% fee takes $0.007, which is 7% of a small number. But your max loss is $0.90. The risk/reward asymmetry amplifies.
Polymarket
Polymarket charges no explicit trading fees. Your costs are the bid-ask spread and gas fees for on/off-ramping. On a liquid market with a 1-cent spread, your round-trip cost is about $0.02 per contract (buying 1 cent above mid, or selling 1 cent below). On illiquid markets, spreads widen to 3-5 cents, and that implicit fee becomes significant.
The math on your edge
Say you have a genuine 3% edge on a market — you believe true probability is 53% and the contract trades at $0.50.
Without fees: EV = (0.53 * $0.50) - (0.47 * $0.50) = +$0.03 per contract.
With 7% Kalshi fee: EV = (0.53 * $0.50 * 0.93) - (0.47 * $0.50) = +$0.0115. Your edge dropped from 3 cents to about 1.15 cents — a 62% haircut.
With 2-cent Polymarket spread: EV = (0.53 * $0.48) - (0.47 * $0.52) = +$0.01. Still positive, but just barely.
Use the PM EV calculator to run your specific scenarios. The fee calculator shows the exact impact across different price points.
What to do about it
First, know your real break-even. Every fee structure shifts the line, and you need to be better than the shifted line, not the naive one. Second, concentrate on markets where your edge exceeds the fee drag by a comfortable margin. A 1% edge evaporates after fees. A 5% edge survives. Third, on tight-margin trades, route to whichever platform charges less for that specific contract.
Fees are the silent killer. The market doesn't have to beat you — the platform takes its cut whether you're skilled or not.
For a head-to-head platform breakdown, see Polymarket vs Kalshi. If price differences between platforms are large enough, you can sometimes arb across platforms and lock in profit regardless of fees.