Written by: Kabuda, Shenchao TechFlow

In the 2024 U.S. election, Polymarket gained instant fame with zero transaction fees and $3.3 billion in presidential election bets, becoming synonymous with global prediction markets.

A year and a half later, the company decided to charge everyone.

Starting from March 30, Polymarket officially expanded the Taker fee to almost all categories of trades: politics, finance, economy, culture, weather, and technology, without exception. Previously, only cryptocurrency and sports contracts were charged. After this expansion, the only remaining "free zone" is geopolitics.

The free lunch ends here.

1. How are fees collected?

Polymarket did not choose a traditional fixed commission model, but adopted a "dynamic probability pricing" mechanism where the transaction fees fluctuate with the contract's winning probability. The closer the probability is to 50% (the most uncertain point in the market), the higher the fee; when the result is close to certain (probability approaching 0% or 100%), the fee approaches zero.

Specifically, the peak rates for each category are:

• Cryptocurrency contracts: 1.80% (increased from the previous 1.56%)
• Economy: 1.50%
• Culture/Weather: 1.25%
• Politics/Finance/Technology: 1.00%
• Sports: 0.75% (increased from the previous 0.44%)
• Geopolitics: 0% (the only free category)

For example: for 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 cryptocurrency contracts is even larger, directly squeezing the actual profits of high-frequency traders.

Meanwhile, Polymarket launched a Maker rebate program, where all transaction fees are not profit for the platform, but returned to liquidity providers (market makers) in the form of daily USDC. Different categories have different rebate ratios, with finance reaching a maximum of 50%, and sports at 25%. The logic is clear: charge retail investors (Takers), subsidize market makers (Makers), and use fees to drive the liquidity wheel.

2. Why charge now?

The answer lies in three numbers.

First, Polymarket's trading volume over the past 30 days was approximately $9.55 billion. Based on the blended effective rate estimations at the new rates, the platform's daily revenue is expected to reach between $800,000 and $1 million, annualizing to around $300 million. For a company without a stable income model, this money is foundational for survival.

Second, the parent company of the New York Stock Exchange, ICE, has just completed an investment commitment to Polymarket totaling about $2 billion. The first tranche of $1 billion is expected in October 2025, with an additional $600 million cash injection in March 2026, plus a maximum of $40 million for acquiring existing shares. When this deal was signed, Polymarket was valued at approximately $8 billion; now, the platform is reportedly seeking new funding rounds at nearly a $20 billion valuation. With this much capital, investors want to see revenue.

Third, competitor Kalshi is already charging, with annual revenues reaching $1.5 billion and a valuation skyrocketing to $22 billion. If Polymarket does not charge, it's essentially using its free traffic to dress up its competitors—educating users for free, who then turn to pay platforms for trading, as they offer deeper liquidity.

Another background that cannot be ignored: Polymarket has just signed an exclusive multi-year partnership with MLB, reportedly worth up to $300 million, having previously partnered with the NHL, MLS, and UFC. Signing with professional sports leagues means the platform must operate commercially. You cannot shake hands with major leagues while telling investors, "We haven't figured out how to make money yet."

3. Congressional "crackdown"

Polymarket chose a delicate moment to implement fees.

Just a week before the fee expansion, California Democratic Senator Adam Schiff and Utah Republican Senator John Curtis jointly introduced the "Prediction Markets Are Gambling Act," demanding that any trading platform registered with the CFTC be prohibited from listing any prediction contracts related to sports events.

Schiff stated bluntly: "Sports prediction contracts are just sports gambling under a different name."

Curtis's concerns are more specific: Utah's constitution prohibits all gambling, yet Polymarket and Kalshi’s prediction contracts operate smoothly in all 50 states, circumventing all state-level regulations.

This is not an isolated case. In the same week, Oregon Democratic Senator Jeff Merkley proposed the more radical "STOP Corrupt Bets Act," which not only seeks to ban sports but also to prohibit prediction contracts related to elections, government actions, and military operations. The Arizona Attorney General has already filed criminal charges against Kalshi for operating an unlicensed gambling business. Nevada courts have issued temporary restraining orders against Kalshi and similar rulings against Polymarket.

Multiple legislative lines are advancing simultaneously, and the prediction market industry is facing the most intense regulatory assault since its inception.

However, the market does not seem particularly tense at the moment. Contracts on Polymarket regarding "Will a law banning sports prediction markets be passed in 2026?" show a passing probability of only 9.5%. These bills have to traverse committee hearings, votes in both houses, and the president's signature, making their passage very difficult in the current crowded congressional agenda.

4. The shadow of manipulation lingers

Apart from the fee controversy, Polymarket faces an even trickier issue: accusations of market manipulation and insider trading never cease.

This January, a newly created account made a precise bet just before the arrest of Venezuelan President Maduro, netting over $400,000. In March, just before the coordinated strikes by the U.S. and Israel against Iran, the on-chain analytics company Bubblemaps discovered six newly created wallets that profited $1.2 million within hours from related contracts. Israeli authorities even arrested two individuals suspected of betting on prediction markets using confidential military intelligence.

Earlier, the market for "Will Ukraine agree to Trump's mineral deal," with over $7 million in trading volume, was arbitrarily ruled "Yes" without any official confirmation, sparking massive protests from users. Some users directly called out "Polyscam" on social media.

A user named Folke Hermansen detailed multiple manipulation cases on X, with the core accusation being: Polymarket's adjudication relies on the UMA token voting mechanism, where two whales control more than half of the voting power, one address holding 7.5 million out of 20 million UMA. Ordinary users cannot challenge the adjudication results.

Polymarket's response was to launch an "Enhanced Market Integrity Rule," which explicitly prohibits trading using stolen confidential information, using insider information to build positions, and allowing parties that might affect outcomes to participate in trading. Additionally, the platform announced a partnership with Palantir and TWG AI to build a market monitoring system.

Are these measures enough? Senator Schiff gave an answer in an interview with CNBC: "It's not enough to simply say 'this is our policy'; the key is whether you have real implementation measures."

5. A $20 billion bet

When all the clues are tied together, Polymarket's situation resembles a classic startup equation:

ICE invested nearly $2 billion, seeking prediction market data as a new type of financial infrastructure. ICE's CEO Sprecher clearly stated at the earnings call that this is not a venture capital move; the return logic for ICE is to incorporate prediction market data into its workflows, driving data sales revenue. MLB has given exclusive cooperation, seeking to leverage the prediction market for user growth. Congress wants regulatory power and control over the gambling industry. Users want zero fees and fair adjudications.

Among these demands, at least two groups are fundamentally contradictory.

The zero-fee era attracted users and traffic, but cannot sustain a company valued at $20 billion. Charging can bring revenue but might push price-sensitive retail investors toward competitors. DraftKings has announced it will establish its own prediction market-making department, while FanDuel has teamed up with CME Group to enter the field, with the two traditional gambling giants estimated to invest hundreds of millions in prediction markets by 2026. If Congress truly passes a ban on sports, Polymarket's currently fastest-growing category will be directly eliminated.

Polymarket has made a clever hedge: keeping geopolitics contracts free. This not only upholds the platform's positioning as a "public prediction tool" but also tells Congress that we are not just a gambling platform; we provide valuable collective wisdom.

However, the boundary between "valuable collective wisdom" and "gambling" has never been determined by technological architecture, but by political games.

Polymarket's own contracts provide an answer: the probability of the ban passing is less than 10%. However, that said, if you trust Polymarket's contracts to judge Polymarket's fate, that itself is an interesting recursive issue.