The implicit fee in market prices when YES + NO exceed $1.00 — typically zero on Polymarket. This hidden cost is how bookmakers profit traditionally, but transparent pricing on Polymarket eliminates it.
The implicit fee in market prices when YES + NO exceed $1.00 — typically zero on Polymarket. This hidden cost is how bookmakers profit traditionally, but transparent pricing on Polymarket eliminates it.
At its core, vig—short for vigorish—represents the hidden margin that gets baked into odds or prices. Imagine you're at a traditional sportsbook and they offer you a bet where the YES outcome has a price of $0.52 and the NO outcome has a price of $0.51. If you add them together, you get $1.03 instead of $1.00. That extra $0.03 is the vig. It's the bookmaker's way of guaranteeing a profit regardless of which outcome wins. In essence, vig is the cost of access to the market, built invisibly into every single price quote.
The term 'vig' comes from the world of bookmaking and street betting, where it referred to the vigorish—the interest or premium charged on loans and bets. In traditional sports betting and casino games, the house always builds in a vig to ensure profitability. The term 'juice' is used interchangeably in the gambling world, while 'overround' is the more formal, mathematical term preferred in academic discussions of odds. Understanding vig matters because it directly affects your expected return. If you're repeatedly betting into markets with 2-3% vig, that inefficiency silently erodes your edge over time. This is why sharp traders obsess over getting the best prices—they're minimizing the vig.
On Polymarket, the concept of vig plays out quite differently than on traditional betting platforms. Polymarket uses a central limit order book (CLOB) model where prices are set by real supply and demand rather than by a house margin. When you look at a market for 'Will the S&P 500 reach 6000 by December 2026?', the YES price might be $0.68 and the NO price might be $0.32, adding up to exactly $1.00 or very close due to rounding. This near-zero vig is one of the major advantages of prediction markets—you're trading directly against other traders, not against a house that needs a built-in edge. Traders benefit from transparent, tight pricing without the hidden friction that vig introduces elsewhere. However, vig can appear on Polymarket indirectly through the spread between the best bid and best ask, though this spread is typically far tighter than traditional betting vig.
One major misconception is that zero vig automatically means you'll make money. In reality, zero vig just means the market is fairly priced from the house's perspective—your success or failure still depends entirely on your prediction skill. Another mistake is ignoring micro-vig in the form of the bid-ask spread. Even though Polymarket doesn't charge a house margin, the market spread (the difference between what you can buy YES for and sell YES for) is a real cost. On illiquid markets, this spread can amount to 1-2% or more, functioning as a hidden vig. Traders new to prediction markets sometimes also confuse vig with trading fees or builder fees, which are separate costs. Finally, it's important not to assume that low vig automatically means the market is accurate—a liquid, low-vig market can still be heavily mispriced if the crowd is wrong or if information asymmetries exist.
Vig connects to several other market concepts worth understanding. The bid-ask spread, as mentioned, is a real cost even without traditional vig. Liquidity also matters deeply: illiquid markets naturally develop wider spreads and thus effective vig because there are fewer traders willing to fill orders at tight prices. Slippage, the difference between your expected fill price and actual fill price, is another real cost that can exceed traditional vig on thin order books. Finally, market efficiency is related to vig in the sense that highly competitive, transparent markets with near-zero vig tend to be more efficient at incorporating information into prices. This is why professional traders gravitate toward platforms like Polymarket—the absence of traditional vig means they're competing purely on skill and information, not fighting a built-in house edge.
Suppose you're trading 'Will the Fed raise rates in May 2026?' where YES is $0.55 and NO is $0.45, summing to exactly $1.00. You've identified no vig because the prices reflect only the crowd's true probability estimate, not a bookmaker's margin. Now imagine a less liquid market where the same question prices YES at $0.57 and NO at $0.45, totaling $1.02—you've found a 2% overround, meaning you'd need to win 102% of your prediction bets just to break even.