How does the arbitrage logic of prediction market platforms actually work? Recently, many people have been curious about the "guaranteed profit" mechanism of platforms like Polymarket. Let's explain this in the simplest way possible.

First, it's important to understand that Polymarket is not like a traditional casino betting on "big or small," but rather trading shares that are opposite in nature—"YES" and "NO." This sounds simple, but the underlying pricing logic is crucial.

Theoretically, the combined price of YES shares and NO shares must exactly equal 1 dollar. For example: if the YES shares are quoted at $0.6, then the NO shares should be at $0.4. This pricing rule is the foundation of prediction markets.

When market prices deviate from this $1 balance line, arbitrage opportunities arise. Once the sum of YES and NO prices exceeds or falls below $1, savvy traders can profit through hedging trades—buying the undervalued side while selling the overvalued side to lock in the price difference.

This is why some say prediction markets can "guarantee profits"—it's not that they always make money, but when prices are out of balance, clear risk-free arbitrage opportunities exist. Once arbitrageurs step in, this imbalance is quickly corrected, and the market returns to rational pricing.