Volume Doesn’t Pay the Bills
Prediction markets are having a moment.
Capital is flowing in. Platforms are scaling quickly. Adoption is accelerating.
Growth is visible.
How these businesses make money sustainably is not.
What ultimately determines who survives isn’t volume. It’s win pool management.
By win pool management, I mean the deliberate structuring of pricing, fees and incentives so that professional winners can exist, recreational customers get a fair and enjoyable experience, and the exchange retains enough from consistent winners to sustain the ecosystem.
I’ve spent over a decade working in and around exchanges, thinking about exactly these commercial trade-offs.
In expansion phases, growth tends to run ahead of monetisation discipline. That imbalance creates opportunity.
Fees Are the Surface. Monetisation Discipline Is the Substance
The UK exchange model charges commission on net market profit. Win, and you pay. Lose, and you don’t.
Most US prediction markets charge per transaction.
Every trade incurs a fee, win or lose. That structure feels familiar to US traders because it mirrors equity markets.
But fee mechanics are only the surface.
What matters is how effectively an exchange monetises consistent winners without damaging the ecosystem that feeds them.
A simple way to evaluate this is: what percentage of a winner’s net profits does the platform retain?
Assume a professional stakes $1,000,000 across thousands of trades and generates a 9% ROI — $90,000 in net profit
| Platform / Model | Fee basis | Fees paid | Retention as % of net winnings |
|---|---|---|---|
| Kalshi (illustrative) | ~1.2% of volume | $12,000 | ~13% |
| Polymarket (illustrative) | 0.10% of volume | $1,000 | ~1% |
| Betfair / BETDAQ (typical) | 2% commission on market profits | $5,000–$6,000* | ~6–7%* (higher with premium charges) |
These figures are illustrative and simplify blended pricing structures, but the structural differences are directionally clear.
Now consider a more sophisticated participant — 80% maker / 20% taker — turning over the same volume at 5% ROI (net profit $50,000).
| Platform / Model | Assumed maker/taker fees | Fees paid (blended) | Retention as % of net winnings |
|---|---|---|---|
| Kalshi (illustrative) | Maker ~0.3%, Taker ~1.2% | $4,800 | ~9.6% (~10%) |
| Polymarket (illustrative) | Maker 0%, Taker 0.10% | $200 | 0.4% (<1%) |
Maker-heavy profiles are common among sharp syndicates and market makers. Under low maker fees, platform retention can fall materially as the make-rate rises.
In my experience, sustainable exchange ecosystems tend to retain somewhere in the region of 20% to 35% of net winnings from most profitable participants. Below that, there is insufficient funding for product development, acquisition and incentives. Above that, professionals leave and liquidity deteriorates.
Most prediction markets are currently operating below that sustainable range.
The 13.5% Man
Towards the end of my time at BETDAQ, we had a horse racing customer — let’s call him Phil Connors.
He was already a significant winner across exchanges. He approached us to negotiate terms.
Most such conversations are about lowering commission. This one was different. He offered to pay 40% of his winnings. He also paid an upfront minimum guarantee.
Then he told us what his win rate would be: 13.5% return on stake.
Not a target. Not an ambition. A statement of fact.
He had calibrated his strategy to win at exactly that rate because he believed it was the maximum sustainable level the ecosystem could tolerate — high enough to justify his capital, low enough not to destabilise the pool he depended on.
Over the next two years, he delivered 13.5%. Exactly as stated.
It remains the clearest example I’ve seen of win pool awareness from a professional participant.
Most traders will extract as much as the market allows. Exchanges need to be structured for that reality.
Incentives Decide Outcomes
Every exchange has two broad behaviours: providing liquidity and taking it. The same participant can do both within minutes.
The commercial structure determines how those behaviours are rewarded.
There are broadly three models:
• An open exchange, managing participants through differentiated commercial terms as it matures.
• A preferred liquidity partner model, concentrating liquidity among selected market makers.
• A single market maker model — effectively a bookmaker operating through an exchange wrapper.
Each can function. None function sustainably without disciplined incentive design.
I learned this directly.
We once moved a consistently profitable soccer market maker from 1% commission to 0% on a revenue share arrangement. On paper, both sides benefited. What changed was behaviour. Without commission drag, they could show more aggressive prices. Those prices became some of the best available globally. Predictably, sharp and arbitrage flow concentrated against them. Variance did the rest. The market maker flipped from profitable to losing, which meant commission revenue disappeared and the revenue share never triggered. We had replaced a reliable income stream with a speculative one — and the deal itself changed the conditions that made the profits possible.
On the other side, we reduced commission to 0% for matched bettors — high-volume participants hedging bookmaker promotions. Volume increased. More importantly, the win pool expanded. Over time, they lost slowly and predictably into the exchange. Lower commission strengthened the ecosystem rather than weakening it.
Blanket pricing rarely works. Win pool management is dynamic. It requires understanding participant behaviour and aligning incentives accordingly.
Premium charges in the UK were an imperfect but logical attempt to address this at scale. Some form of equivalent mechanism is inevitable as prediction markets mature.
The Golden Moment
Prediction markets are currently prioritising growth and user acquisition. Monetisation discipline comes later.
We’ve seen this before. In daily fantasy, the land-grab phase rewarded scale first and monetisation later.
In the current environment, growth is outpacing win pool management discipline. That imbalance favours sophisticated professionals — whether providing liquidity or taking it. Conditions are attractive.
They will not remain static.
As platforms mature, they will need to monetise consistent winners more effectively while preserving a fair and compelling experience for recreational participants. The exchanges that strike that balance will justify their valuations. The rest will discover that volume alone is not enough.
Exchanges don’t ultimately compete on how much they trade. They compete on how intelligently they manage and monetise their win pool.
These dynamics aren’t theoretical. They show up daily in pricing behaviour and liquidity flows. At TxODDS, we supply pricing and live data to the market makers, professionals and operators competing in this environment. If you’re trading this space seriously and want the right infrastructure behind you, we’re ready to help.
