The end of Polymarket's free era: a multi-party battle over "fees"

Byline: Kabuda, Deep Tide TechFlow

In the 2024 U.S. presidential election, Polymarket took off with zero fees and $3.3 billion in election betting volume, becoming a byword for prediction markets worldwide.

After a year and a half, the company has decided to charge everyone.

Starting March 30, Polymarket will officially expand Taker fees to almost all trading categories—politics, finance, economics, culture, weather, technology, you name it. Previously, only crypto and sports contracts were charged. After this expansion, the only remaining “free zone” is geopolitics.

No more free lunch.

I. How are the fees collected?

Polymarket didn’t choose a traditional fixed-commission model. Instead, it uses a “dynamic probability pricing” mechanism: the fee floats with a contract’s probability of winning. The closer the probability is to 50%—when the market is most uncertain—the higher the fee. When the outcome is close to certain (probability trends toward 0% or 100%), the fee approaches zero.

Specifically, the peak fee rates for each category are:

Crypto contracts: 1.80% (up from 1.56% previously)

Economics: 1.50%

Culture/Weather: 1.25%

Politics/Finance/Technology: 1.00%

Sports: 0.75% (up from 0.44% previously)

Geopolitics: 0% (the only free category)

Here’s an example: a $50 sports contract. If the probability is exactly 50/50, the fee rises from the original $0.22 to $0.38. The increase for crypto contracts is even larger, directly squeezing the real returns of high-frequency traders.

At the same time, Polymarket rolled out a Maker rebate program. Not all fees are platform profit. Instead, they are returned to liquidity providers (market makers) in the form of daily USDC. The rebate percentage differs by category: up to 50% for finance, 25% for sports. The logic is very clear: charge retail traders (Takers), subsidize market makers (Makers), and use fees to drive the liquidity flywheel.

II. Why start charging now?

The answer is hidden in three numbers.

First, Polymarket’s trading volume over the past 30 days was about $9.55 billion. Using the blended effective fee rate estimated from the new fee schedule, the platform’s daily revenue will reach $800,000 to $1.0 million, or about $300 million annually. For a company that hasn’t yet built a stable revenue model, this money is the foundation for survival.

Second, ICE, the parent company of the NYSE, has just completed its investment commitment to Polymarket totaling about $2 billion. The first $1 billion is due in October 2025, and in March 2026 there will be an additional $600 million in cash plus a $40 million acquisition of older shares. When that deal was signed, Polymarket’s valuation was about $8 billion; now the platform is reportedly raising a new round at a valuation approaching $20 billion. When you take so much money, investors want to see revenue.

Third, competitor Kalshi has already started charging. Its annualized revenue has reached $1.5 billion, and its valuation has also soared to $22 billion. If Polymarket doesn’t start charging, it will essentially be giving its free traffic to its rival—educating users for free, only for those users to turn around and trade on paid platforms where liquidity is deeper.

There’s also a background factor that can’t be ignored: Polymarket has just signed an exclusive multi-year partnership agreement with MLB, reportedly worth as much as $300 million. It had already reached partnerships with the NHL, MLS, and UFC. Signing up with professional sports leagues means the platform must commercialize operations. You can’t shake hands with the major leagues and tell investors, “We still haven’t figured out how we’ll make money.”

III. A “crackdown” from Congress

Polymarket chose a delicate timing for introducing fees.

One week before the fee expansion, Democratic Senator Adam Schiff of California and Republican Senator John Curtis of Utah jointly introduced the “Prediction Markets Are Gambling Act,” requiring a ban on any prediction contracts related to sports events being listed on trading platforms that are not registered with the CFTC.

Schiff was blunt: “Sports prediction contracts are sports gambling—just with a different name.”

Curtis’s concerns are more specific: Utah’s constitution prohibits all gambling, but Polymarket and Kalshi’s prediction contracts have been running freely across all 50 states, bypassing all state-level regulation.

This isn’t a one-off. In the same week, Democratic Senator Jeff Merkley of Oregon introduced an even more aggressive “STOP Corrupt Bets Act.” It would ban not only sports, but also prediction contracts related to elections, government conduct, and military actions. Arizona’s attorney general has already filed criminal charges against Kalshi, accusing it of operating a gambling business without a license. Meanwhile, Nevada courts have issued temporary restraining orders against Kalshi, and there are similar rulings against Polymarket as well.

Multiple legislative tracks are moving forward at the same time, and the prediction market industry is facing the most intense regulatory push since it first came into being.

However, the market is not that nervous right now. On Polymarket, contracts about “whether a ban on sports prediction markets will pass in 2026” show a probability of only 9.5%. For these bills to become law, they have to pass through layers of hurdles—committee hearings, votes in both chambers, the President’s signature, and more. Given the crowded agenda in the current Congress, it will be very hard to get across the finish line.

IV. The shadow of manipulation isn’t gone

Beyond the fee controversy, Polymarket also faces a tougher issue: accusations of market manipulation and insider trading have never stopped.

In January this year, a newly created account made precisely timed bets on the arrest of Venezuelan president Nicolás Maduro, earning more than $400,000 net before it happened. Before the coordinated strikes against Iran by the U.S. and Israel in March, the on-chain analytics firm Bubblemaps found that six newly created wallets profited $1.2 million within a few hours through related contracts. Israeli authorities even arrested two people accused of placing bets on prediction markets using confidential military intelligence.

Earlier than that, the market “Whether Ukraine will agree to Trump’s mineral deal”—a deal with over $7 million in trading volume—was forcedly ruled “Yes” in the absence of any official confirmation, triggering large-scale protests from users. Some users even directly shouted “Polyscam” on social media.

A user named Folke Hermansen on X detailed multiple cases of manipulation. The core allegation is that Polymarket’s rulings rely on the UMA token voting mechanism, and two “whale” holders control more than half of the voting power. One address holds 7.5 million out of 20 million UMA tokens. Ordinary users can’t realistically challenge the ruling outcome.

Polymarket’s response was to introduce an “enhanced market integrity rules” policy, explicitly banning trading using stolen confidential information, building positions using insider information, and allowing parties who can influence outcomes to participate in trades. At the same time, the platform announced a partnership with Palantir and TWG AI to build a market monitoring system.

Are these measures enough? In an interview with CNBC, Senator Schiff answered: “Just saying ‘this is our policy’ isn’t enough. The key is whether you actually have the means to implement it for real.”

V. The $20 billion betting game

Put all the clues together, and Polymarket’s situation is like a classic startup equation:

ICE is pouring nearly $2 billion in. What it wants is prediction market data as a new kind of financial infrastructure. ICE CEO Sprecher was clear at the earnings call: this isn’t venture investing; ICE’s return logic is to integrate prediction market data into its own workflow and drive data sales revenue. MLB’s exclusive partnership is about wanting prediction markets to help the league grow its user base. Congress wants regulatory power and control over the gambling industry. Users want zero fees and fair outcomes.

At least two of these demands are fundamentally in conflict.

The zero-fee era attracts users and traffic, but it can’t sustain a company valued at $20 billion. Charging can create revenue, but it may also push price-sensitive retail traders to competitors. DraftKings has already announced it will build its own prediction market market-making unit. FanDuel has teamed up with CME Group to move into the space. The two traditional gambling giants are expected to invest up to hundreds of millions of dollars in prediction markets in 2026. And if Congress truly passes a sports ban, Polymarket’s fastest-growing category right now will be directly cut off.

Polymarket made a smart hedge: keeping geopolitics contracts free. This is both a commitment to the platform’s positioning as a “public prediction tool,” and a message to Congress that we’re not just a gambling platform—we provide valuable collective intelligence.

But the line between “valuable collective intelligence” and “gambling” has never been determined by technical architecture. It’s been determined by political games.

Polymarket’s own contracts provide the answer: the ban passes with a probability below 10%. But then again, if you trust Polymarket’s contracts to judge Polymarket’s fate, then that in itself is an interesting recursive problem.