Core Insights - A new academic paper reveals that there is a consistent presence of "free money" on Polymarket, with traders capitalizing on mispriced markets [1] - The study analyzed data from April 2024 to April 2025, identifying thousands of instances of market price discrepancies [1][5] Market Inefficiencies - In certain markets, the prices of "Yes" and "No" shares did not sum to one dollar, creating risk-free profit opportunities for quick traders [2] - More subtle mispricing was observed in logically related markets, allowing savvy traders to lock in profits regardless of outcomes [3] Profit Potential - Researchers estimate that over $40 million in profits have been extracted from the system by arbitrageurs, indicating a viable business model [4] - The study identified more than 7,000 markets with measurable mispricing, highlighting the prevalence of these opportunities [5] Broader Implications - The findings raise questions about whether these inefficiencies are unique to Polymarket or indicative of prediction markets as a whole [5] - Continuous peer-to-peer trading platforms, whether on crypto or regulated venues, are subject to similar structural inefficiencies [6] Market Dynamics - In traditional finance, inefficiencies are quickly arbitraged away by algorithmic market-makers, a trend now seen in prediction markets as well [7] - Sophisticated traders, often using bots, monitor multiple markets to exploit inconsistencies, which helps realign prices after they take their profits [7]