# How do market makers make money? The spread, what it costs, and Kalshi and Polymarket's programs

Market makers earn the spread and lose some back to better-informed traders. The arithmetic, how to measure it, and what Kalshi and Polymarket pay.

Source: https://rizon.markets/learn/how-do-market-makers-make-money (updated 2026-11-04)

> **Short answer:** A market maker rests a bid and an ask, and earns the spread when both fill. It loses when someone who knows more hits its quote just before the price moves. So profit is spread captured, minus adverse selection, minus inventory risk, plus any fee rebates or rewards. Anyone can try it on Polymarket and Kalshi, and neither charges makers much. We found no reliable public figure for what retail market makers earn, so measure it on your own fills before you trust anyone's number.

## The arithmetic

Quote a market at 49¢ bid, 51¢ ask, with 100 shares a side.

| What happens | You | Result (¢ a share) |
|---|---|---:|
| One person sells at your 49, another buys at your 51 | Bought and sold | +2 |
| You buy at 49, then news moves it to 45 | Holding a loser | −4 |
| You sell at 51, then it moves to 55 | Short a winner | −4 |
| You buy at 49 and it holds at 50 | Holding, marked at the middle | +1 |

A maker wins small and often, and loses big and sometimes. The bad rows aren't bad luck, either: the people most eager to hit your quote are the ones who've just seen something you haven't. That's adverse selection, and it's why a [stale quote is so expensive](https://rizon.markets/bots).

## How to measure it

Your PnL doesn't tell you why you're making or losing money. These do:

| Measure | How | What it tells you |
|---|---|---|
| Spread captured | Your fill against the midpoint at the moment you were filled | What you were paid to be there |
| Adverse selection | How far the midpoint moved against you 1 and 5 seconds later | What the flow knew |
| Realised spread | The first minus the second | Your real edge per fill |
| Inventory | Net position over time | How much you're just holding a view |

If realised spread is negative, widen, re-quote faster or quote less when things are moving. Skewing against your inventory stops you building a position you never wanted.

## What Polymarket and Kalshi pay makers

| | Polymarket | Kalshi |
|---|---|---|
| Maker fee | ["Makers are never charged fees"](https://docs.polymarket.com/trading/fees) | [0 by default](https://kalshi.com/docs/kalshi-fee-schedule.pdf); 0.0175 × contracts × p × (1 − p) on markets where it applies |
| Taker fee at 50¢ | 1 to 1.75¢ a share ([calculator](https://rizon.markets/learn/polymarket-fee-calculator)) | 1.75¢ a contract |
| Rebates | [15 to 25% of a market's taker fees](https://docs.polymarket.com/programs/maker-rebates), shared by makers, daily | Reduced fees through its [market maker program](https://help.kalshi.com/en/articles/13823819-how-to-become-a-market-maker-on-kalshi), with quoting requirements |
| Rewards for resting | [Liquidity rewards](https://docs.polymarket.com/programs/liquidity-rewards): scored by how close to the midpoint, sampled each minute | [Liquidity Incentive Program](https://help.kalshi.com/en/articles/13823851-liquidity-incentive-program): $1 to $1,000 per market a day, paid even if you're never filled, US members only, currently due to end Jan 1, 2027 |

Polymarket's rewards score a resting order by ((v − s) ÷ v)², where v is the market's maximum spread and s your distance from the midpoint, so the score falls away quickly as you move out. On Nov 4, 2026, one market in its [public rewards list](https://clob.polymarket.com/rewards/markets/current) paid $13 a day, shared among orders of at least 20 shares within 4.5¢ of the midpoint. That's the scale to think in: you split it with everyone else quoting there, and being filled can cost more than the reward pays.

## Can a retail trader do this?

Yes, in the sense that nothing stops you. Kalshi itself says its market makers are ["primarily individuals and small institutions"](https://help.kalshi.com/en/articles/13823808-who-are-you-trading-with), though large firms are there too: [Susquehanna joined in 2024](https://news.kalshi.com/p/liquid-prediction-markets-are-finally-here). Limit orders do better on these venues: [a study of 588 million Polymarket trades](https://ideas.repec.org/p/cpr/ceprdp/21615.html) found "successful traders provide liquidity using limit orders ... while unsuccessful traders take liquidity using market orders".

That's not the same as saying you'll win. You'd be up against firms with faster systems, better models and more capital, on books that are often thin. And most income claims you'll find online come from people selling bots.

## Try it first

Four ways to find out cheaply whether you can quote:

| Start with | What you learn |
|---|---|
| [Make me a market](https://rizon.markets/learn/make-me-a-market), a one-minute game | The spread against adverse selection, on one hand of cards |
| [A market maker on a paper book](https://rizon.markets/learn/how-to-build-a-trading-bot-with-claude-code) | Fills, stale quotes, inventory, with a key in one call. A [bot there](https://rizon.markets/bots) takes any quote you leave stale |
| [Open-source code](https://github.com/PlathsOven/prediction-market-maker) | How a full market maker prices and guards its quotes |
| [How to make markets in horizon contracts](https://rizon.markets/learn/how-to-make-markets-in-horizon-contracts) | The same job when the quote is a strike |

Trading firms test the same instincts: they run [market making games](https://rizon.markets/learn/make-me-a-market) in interviews, where you quote a two-sided price and defend it.

## FAQ

### How do market makers make money on Kalshi?

The same way as anywhere: the spread between their bid and ask, less what informed traders take from them. On top, some earn Kalshi's Liquidity Incentive Program, and members of its market maker program can get reduced fees.

### Does Kalshi pay market makers?

Through its Liquidity Incentive Program, yes: $1 to $1,000 per market per day for resting orders, for US members, even if they don't fill. Under an October 2026 change, [participants in a market-making agreement don't receive those rewards in that market](https://www.cftc.gov/filings/orgrules/rules10142633813.pdf).

### Can you make money market making on Polymarket?

Some do. No reliable public number says how many, or how much at retail size. Estimates online are mostly anecdotes, so treat them as that.

### How much money do you need to be a market maker?

There's no fixed minimum on Polymarket or Kalshi. Rewards often need a minimum order size, like the 20 shares above. The real constraint is that you need enough to survive being wrong on inventory, across enough markets for the small wins to add up.

### What is adverse selection?

Getting filled most often when you least want to. Someone who knows the price is about to rise will buy from your ask just before it does, so your fills on average lose money right after they happen. It's the main cost of making markets.