Question 1

Why don't prediction market odds add up to 100%?

Accepted Answer

In a market group where exactly one outcome can win, each YES share pays $1 if that outcome resolves true, so the prices should sum to $1. They drift apart because each outcome trades in its own order book against its own buyers and sellers. Nothing forces the books to agree; only a trader taking the other side brings them back into line.

Question 2

What does it mean when prediction market prices sum to more than $1?

Accepted Answer

It means the market collectively prices the outcomes as more than certain. Selling one share of every outcome collects more than the $1 that will be paid out when the market resolves, so the difference is a spread that closes at resolution regardless of which outcome wins.

Question 3

Is prediction market arbitrage risk-free?

Accepted Answer

No. The payout is determined at resolution, but capital is locked until then, fees and slippage consume part of the gap, filling every leg is not guaranteed, and the position depends on the market resolving as its rules describe. A partially filled basket is a directional bet, not an arbitrage.