Prediction Markets Take a Cut of Every Trade

Key Takeaways

• Kalshi and Polymarket charge a taker fee set by a formula that peaks on contracts priced at 50 cents, where Kalshi takes 1.75 cents per contract.
• Combos carry a higher fee on long shots at Polymarket US, and DraftKings puts its all-in take on prediction trades at about 11.1%, close to a sportsbook’s hold.
• Kalshi says it is a federally regulated exchange rather than a gambling operator, so it avoids the state sportsbook taxes that run from 6.7% in Nevada to 51% in New York.

Polymarket told CNBC on November 10 that its annualized revenue has passed $1.8 billion, and a fresh funding round values it at $21 billion. Its bigger rival, Kalshi, raised $1 billion at a $40 billion valuation on October 29. Both are exchanges overseen by the CFTC, the federal Commodity Futures Trading Commission, and neither one bets against its customers.

So where does the money come from? Mostly from a small fee on each contract, set by a formula both companies file with the CFTC. Unlike a sportsbook, the exchange doesn’t care who wins. It cares how much changes hands, at what price, and in which kind of contract. Here is how that business works, and how its take compares with a bookmaker’s hold.

The Exchange Never Takes a Side

An event contract pays $1 if something happens and nothing if it doesn’t. Traders set the price between those two points, so a contract at 40 cents reads as a 40% chance. For every buyer of yes there is a seller, and the exchange sits in the middle matching them.

That is the core difference from the house edge casinos rely on. A sportsbook sets the line and keeps what’s left after paying winners. Kalshi says it has no stake in outcomes and that its revenue model “revolves around transaction fees rather than positions on specific outcomes.” It charges a fee “on the expected earnings of the contract,” in its own words.

One Formula Sets the Fee

Kalshi’s fee schedule, as filed with the CFTC, multiplies 0.07 by the number of contracts, the price and one minus the price, then rounds the result up. The result peaks at 50 cents, where the chance is a coin flip. In an October 14 filing Kalshi put its standard taker fee at that price at $0.0175 per contract, or 1.75 cents.

The shape matters. Measured against what you pay, the fee is 7% times one minus the price, so it’s 3.5% of the stake on a 50 cent contract and 6.3% on a 10 cent long shot. A contract near certainty costs almost nothing to trade. Kalshi charges the taker, the trader who hits a resting order, and only some of its markets carry a maker fee.

Polymarket US, the CFTC-registered exchange that Polymarket opened in May, uses the same formula with its own coefficient. Its weekly notices to the CFTC show it raised the taker number from 0.05 to 0.06 on July 1 and to 0.0695 on September 17, a hair under Kalshi’s 0.07. Table tennis contracts now carry 0.10.

What $100 of Trading Pays

Put $100 into contracts at 50 cents and you buy 200 of them. On Kalshi the taker fee comes to $3.50. On Polymarket US it’s about $3.48, but the exchange hands about $0.63 straight to the market maker on the other side as a rebate, so it keeps about $2.85.

Polymarket’s international platform charges less on sports. Its published rate is 0.05, so the same trade costs $2.50, and 15% of that, about $0.38, goes back to makers. These are list prices before rounding and before the volume rebates the busiest traders earn.

Rebates and the Market Maker’s Cut

The fee is only part of the picture, because exchanges need someone to quote both sides of every market. On Polymarket’s international site, makers are never charged and taker fees fund a daily maker rebate paid in pUSD. On Polymarket US the maker rebate is paid at the time of the trade.

Big takers get money back too. Polymarket US refunds 10% of taker fees above $250,000 of monthly volume, 25% above $1,000,000 and 50% above $10,000,000. Kalshi filed its own program in October for self-clearing members, its most active firms, starting on or after October 27 with rebates of 15%, 30% and 50%. Its stated aim is to cut the net taker fee in some markets to half a cent or less.

DraftKings Shows the Full Take

Market makers don’t only collect rebates. They earn the spread between what they buy and sell at, and that’s where much of the real margin hides. DraftKings, which owns its own brokerage, exchange and market maker, gave the clearest number yet in its third-quarter Predictions results.

It reported take rates of about 11.1% on trades in September and October “across brokerage, exchange, and market making,” and said it kept about two-thirds, with third-party market makers capturing the rest. That is roughly three times the 3.5% exchange fee on a 50 cent contract, which suggests the spread and the brokerage layer earn far more than the headline fee.

Combos Are Where the Margin Is

Combos are the prediction market version of a parlay: several outcomes joined into one contract that only pays if every leg lands. They’ve taken over quickly. Combos made up more than 70% of the volume traded on Polymarket’s US exchange on one Sunday in November 2026, CNBC reported, and they reached 27% of consumer volume at DraftKings in October.

Sportsbooks know why that matters. DraftKings said its sportsbook hold rate passed 11% in the third quarter as its parlay mix rose by 300 basis points. Parlays tend to hold more for the house because the margin on each leg compounds.

On an exchange the logic is simpler. A combo is usually a long shot, and the fee formula already charges more per dollar on long shots. Polymarket US then made combos pricier still.

The Fee on a Long Shot

From September 25, Polymarket US charges combos the standard fee plus an extra term weighted toward low prices, according to its combo fee notice. On $100 at 10 cents, a straight trade costs about $6.26 and a combo about $8.88, nearly 8.9% of the stake.

On October 7 it also set the maker rebate on combos to zero, so the exchange now keeps the whole combo fee. Its international platform does the same, with a 0.05 rate on every combo and no maker rebate.

Sports Pays the Bills

Sports is the product that built these businesses. In July 2026, sports made up about 78% of Kalshi’s volume and 82% of Polymarket’s, including Polymarket US, according to a Pew Research Center analysis of data from The Block. Crypto came a distant second on both. Politics, the original selling point, was under 1% of Kalshi’s volume that month.

The World Cup did a lot of that work. In June and July, sports trading topped $58 billion on Kalshi and neared $22 billion on Polymarket, Pew found. Americans wagered around $40 billion with legal sportsbooks in the whole first quarter of 2026.

Kalshi’s Push Beyond Sports

Kalshi says sports brought millions of people to the exchange and now wants that liquidity elsewhere. It reports more than $1 billion of non-sports annualized revenue, commodities trading fees of more than $100 million a year after three months and crypto volume of $140 billion annualized.

A Fee Versus a Sportsbook’s Hold

A sportsbook’s version of revenue is its hold, the share of bets it keeps after paying winners. In Michigan, online sportsbooks took $544.8 million of bets in September and reported $55.5 million in gross receipts, a hold of about 10.2%, according to the Michigan Gaming Control Board. The state’s adjusted figure was $24.89 million, about 4.6% of handle.

Set against that, a 3.5% exchange fee looks cheap. The 11.1% DraftKings reports for its Predictions trades looks a lot like a bookmaker’s hold, once the spread and brokerage are counted. For a customer, the honest comparison is the all-in take, not the fee on the receipt.

The Tax Gap

The bigger difference is what comes off the top. Licensed sportsbooks pay state tax on gross gaming revenue at rates from 6.7% in Nevada to 51% in New York, about $4 billion a year in all, according to NPR. Kalshi avoids those taxes by insisting it is not a sports gambling operator, NPR reported, and whether that holds up under state gambling law is at the center of more than 20 federal lawsuits.

Kalshi spokeswoman Elisabeth Diana put the company’s line this way: “We comply with all corporate tax laws and believe in responsible state taxation, even as a federally regulated derivatives exchange.” North Carolina has gone its own way, with a 6% tax on prediction markets against 23% for online sportsbooks, and Kalshi claims it will end up paying a comparable amount there.

That gap is also why the sportsbooks are paying to join in, a cost laid out in what prediction markets cost DraftKings and FanDuel. A federal contract that pays no state gaming tax doesn’t need the same hold to make the same profit.

The Crypto Side of Polymarket

Polymarket began as a crypto platform, and its international exchange still runs that way. Trades settle in pUSD, a token on the Polygon blockchain backed by USDC, the dollar stablecoin. Polymarket charges nothing to deposit or withdraw USDC, and it keeps geopolitical and world events markets fee-free.

Its crypto markets carry the highest rate on the site, 0.07, with sports at 0.05 and politics at 0.04. For readers who already use crypto gambling sites, the model will look familiar: a token in, a token out and a fee in between.

The two platforms are kept apart by law. In 2022 the CFTC ordered Polymarket to pay a $1.4 million penalty for running unregistered event markets, and the settlement bars US residents from the international site. CNBC reports the CFTC is now investigating whether Polymarket broke that settlement, along with its advertising.

What the Valuations Price In

Investors are paying for growth rather than today’s fees. Kalshi was valued at $11 billion in December 2025, $22 billion in May and $40 billion in its October round, co-led by Wellington and Sequoia. Polymarket was about $8 billion before Intercontinental Exchange agreed to invest up to $2 billion in October 2025, then $15 billion in April and $21 billion in the round led by 1789 Capital.

At $21 billion, Polymarket is valued at about 12 times its $1.8 billion revenue run rate. Its US exchange handled more than $14.5 billion of notional volume in October, up from $4 billion in June, and Kalshi says it holds over 75% of prediction market trading volume.

The Interest Kalshi Pays Back

There’s one more line in the model, and on Kalshi it runs toward the customer. Kalshi pays 3.50% a year in interest on cash and open positions for accounts with an average balance of at least $250, so money parked on the exchange earns something while a market waits to settle.

For now, both exchanges make their money the same simple way. They take a fraction of a cent to a couple of cents on each contract, and sports, combos and long shots are where that fraction is largest.