Polymarket enhances protection against automated arbitrage with a new fee structure

FunGibleTom · 2026-01-13T10:24:06+00:00

Polymarket has implemented measures to curb high-frequency traders exploiting price discrepancies between its platform and major crypto exchanges. A notable trader profited significantly through a systematic arbitrage strategy. In response, Polymarket introduced dynamic fees to inhibit rapid arbitrage while redistributing funds to liquidity providers, aiming to preserve market integrity and fairness.

FunGibleTom

2026-01-13 10:24:06

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The Polymarket platform has taken decisive measures to curb the activities of high-frequency traders who systematically exploited the information gap between platform quotes and prices on major crypto exchanges.

What the profit extraction scheme looked like

Under the identifier 0x8dxd, a trader was recorded conducting a large-scale arbitrage operation over eleven months. His activity statistics are impressive: over seven thousand completed transactions with a 99% success rate, generating a profit of half a million dollars. The key to this result was the simple use of the time lag between the updating of prices on Polymarket and the movements of quotes on major competitors in the cryptocurrency trading sphere.

The mechanism was straightforward: within a few milliseconds after a new market price was fixed, orders were placed to catch the guaranteed movement in the desired direction. This was not a prediction but pure extraction of value from the temporary information gap.

How Polymarket responded to the challenge

The platform implemented an innovative dynamic fee system for takers, which fluctuates up to 3.15% for transactions conducted within a fifteen-minute window from the time the price is established on the market. This system acts as a selective filter, purposefully blocking the possibility of rapid arbitrage.

A critically important point: all collected fees are redirected to liquidity providers acting as market makers. Thus, profits are redistributed from speculators to those participants who create conditions for the sustainable functioning of the market.

Impact on the ecosystem

The new approach to regulating arbitrage serves a dual purpose: on one hand, attempts at short-term exploitation of market inefficiencies are thwarted; on the other hand, healthy competition and the integrity of price formation on the platform are maintained. This measure aims to protect the interests of honest market participants while fostering an environment of fair trading.

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