Polymarket's Fee Strategy and Its Impact on Liquidity and Market Growth

In the rapidly evolving landscape of prediction markets, fee structures have emerged as a critical determinant of liquidity, trader behavior, and long-term platform sustainability. Polymarket, a crypto-native prediction market platform, has adopted a dual approach: a zero-fee model for its global operations and an ultra-low 0.01% taker fee for its U.S. market. This strategy, combined with a $2 billion investment from Intercontinental Exchange in Q4 2025, positions Polymarket to challenge established players like Kalshi, which charges an average of 1.2% in trading fees. This article examines how Polymarket's fee design is reshaping liquidity dynamics, trader participation, and the broader prediction market ecosystem.

The Zero-Fee Global Model: A Magnet for Liquidity

Polymarket's global platform has maintained a zero-fee structure for deposits, withdrawals, and mid-market trades since 2024. This model, built on the Polygon blockchain and USDC stablecoins, eliminates transaction costs and incentivizes high-frequency trading and arbitrage activity. The absence of fees has driven sustained volume growth, with monthly trading volumes surging to $1.4–1.5 billion in September 2025.

Academic analysis underscores the importance of low fees in fostering liquidity. A 2025 study notes that fragmented liquidity across prediction markets-often due to semantic non-fungibility of events-can be mitigated by cost-effective platforms like Polymarket. By removing friction, Polymarket has attracted a global user base, including arbitrageurs who exploit price discrepancies across platforms. For instance, traders can profit from cross-listed events on Polymarket and Kalshi by capitalizing on the 1.19% fee differential.

However, the zero-fee model is not without risks. Polymarket relies on liquidity providers and network fees for revenue, which may limit its ability to scale sustainably. Additionally, concerns about artificial trading-such as wash trading-suggest up to 25% of Polymarket's volume could be inflated, potentially masking the true impact of its fee strategy on liquidity.

The U.S. Market: A Strategic 0.01% Taker Fee

Polymarket's U.S. market, launched in July 2025 following the acquisition of CFTC-licensed QCEX, introduces a 0.01% taker fee. This rate, equivalent to $0.065 on a $650 contract, is a fraction of Kalshi's 1.2% fee structure. The move reflects a calculated balance between regulatory compliance and affordability, aiming to attract U.S. retail and institutional traders.

The low fee has already shown early success. In October 2025, Polymarket reported $3.02 billion in monthly volume, driven by high-profile events like U.S. political elections and sports markets. This growth contrasts with Kalshi's 66% market share in late 2025, which leverages its CFTC compliance and partnerships with platforms like Robinhood. Polymarket's U.S. strategy, however, prioritizes accessibility over regulatory shortcuts, appealing to crypto-native users who value permissionless participation.

Trader Behavior: Incentives and Risks

Fee structures directly influence trader behavior. Polymarket's zero-fee global model encourages speculative trading and arbitrage, but it also creates a high-stakes environment where only 0.51% of wallets achieve profits exceeding $1,000. Traders rely on sophisticated strategies, such as cross-platform arbitrage and information asymmetry, to navigate tight margins.

The 0.01% U.S. fee, while minimal, introduces a subtle cost-benefit tradeoff. For high-frequency traders and liquidity providers operating on narrow margins, even a 0.01% fee can alter profitability calculations. This could deter algorithmic trading activity compared to the zero-fee global model, though the fee remains significantly lower than Kalshi's 1.2%.

Kalshi's fee structure-0% trading fees but a 2% debit deposit charge-further highlights divergent strategies. While Kalshi's model attracts U.S. users with fiat accessibility, Polymarket's crypto-native approach prioritizes low-cost on-chain settlements. These differences have shaped market share dynamics, with Kalshi capturing 62–65% of sector volume by late 2025, while Polymarket retains a loyal global audience.

Long-Term Sustainability: Balancing Growth and Profitability

Polymarket's fee strategy hinges on its ability to monetize without stifling growth. The platform's $2 billion funding round and rumored token/airdrop plans suggest a focus on long-term value creation. However, the zero-fee global model raises questions about revenue sustainability. Unlike Kalshi, which generates income through deposit fees and institutional partnerships, Polymarket must rely on indirect monetization, such as liquidity provider fees or future tokenomics.

Regulatory risks also loom. The U.S. market's 0.01% fee is a temporary advantage, but Polymarket's crypto-native model faces scrutiny from regulators wary of market manipulation and lack of consumer protections. If the platform fails to secure a clear regulatory pathway, its U.S. growth could stall despite low fees.

Conclusion: A Fee Strategy for the Future

Polymarket's dual fee model-zero fees globally and 0.01% in the U.S.-is a bold experiment in balancing accessibility, liquidity, and profitability. By undercutting competitors like Kalshi, it has positioned itself as a disruptor in the prediction market space. However, the platform's long-term success will depend on its ability to address regulatory challenges, mitigate artificial trading risks, and sustain liquidity without direct fee revenue.

For investors, Polymarket's strategy highlights a broader trend: in prediction markets, fee structures are not just cost metrics but levers that shape entire ecosystems. As the sector matures, platforms that can harmonize low fees with sustainable monetization will likely dominate. Polymarket's journey offers a compelling case study in how fee design can drive liquidity-and how it might test the boundaries of market sustainability.