Who is on the other side of your trade
Somebody sold you that contract. On most markets, most of the time, it was not a person with a view about the outcome - it was a program being paid a subsidy to stand there.
The counterparty is usually not an opponent
It is tempting to imagine the other side of a trade as someone who disagrees with you. Sometimes it is. More often, especially on a liquid market, it is a market maker: a participant who posts both a buy and a sell price, aims to be flat by the end of the day, and earns the spread between them rather than a view on the outcome.
That distinction matters because it changes what a fill tells you. If a person with a considered opinion took the other side of your trade, that is weak evidence you might be wrong. If a program quoting both sides took it, it is no evidence at all - it would have taken the opposite trade just as readily a second later.
A market maker taking your trade is not disagreeing with you. It is charging you for immediacy and hoping to be flat by evening.
The venues pay for this, and they publish the terms
This is not a hidden arrangement. Prediction market venues operate published programs that pay participants for posting resting orders, because a book with no resting orders is unusable. Polymarket runs a central limit order book with full API access and pays liquidity providers automatically for posting limit orders, with rewards distributed to maker addresses daily.
The formula is public and it tells you what behaviour is being bought. Rewards scale with participation in a market, favour two-sided depth over single-sided, and increase as the quoted spread tightens toward the midpoint. In other words, the venue is paying specifically for tight, two-sided quotes - which is exactly the thing that makes a market pleasant to trade on.
The sums are not trivial. Polymarket's order book upgrade shipped with a million dollars in liquidity rewards explicitly aimed at attracting professional market makers, and in a single month the venue distributed over five million dollars in such rewards across sports and esports markets, with individual football fixtures carrying five figures split between pre-game and in-play periods. Kalshi runs its own equivalents: a program paying for resting orders that improve liquidity even when they never fill, a volume-based rebate of up to half a cent per contract in the mid-price range, and a designated liquidity provider status for members with a formal market maker agreement.
- Rewards are paid for posting, not for being right.
- The formula favours two-sided quotes and tighter spreads.
- Millions per month, concentrated in the markets the venue wants deep.
This explains the shape of the book you see
It explains why some markets are tight and others are not. A market inside an incentive program has professionals competing to quote it; a market outside one has whoever happens to be interested. The difference in spread between the two is frequently larger than any edge a retail participant is likely to find, which is why the liquidity guide insists on checking depth before treating a price as real.
It also explains time-of-day patterns. Automated quoting runs continuously, but the humans supervising it, and the flow it is quoting against, do not. Books are typically tightest when the underlying subject is in the news and the operators are awake, and widest in the hours when neither is true.
And it explains why a book can vanish. Market makers widen or withdraw when they cannot price the risk - immediately before a scheduled announcement, during a fast-moving event, or when a resolution question becomes genuinely ambiguous. The moments when you most want to trade are precisely the moments the subsidised counterparty is least willing to be there.
Liquidity is a service being purchased, not a property of the market. It appears where it is paid for and disappears when risk cannot be priced.
What this does not mean
It does not mean the market is rigged against you, and it does not mean the price is manipulated. A subsidised market maker's incentive is to quote tightly around whatever the market's consensus is - not to push the price anywhere. If anything, the subsidy makes prices more accurate, because it pays for the constant small corrections that keep quotes near fair value.
It also does not mean you are outmatched on every question. A market maker is optimising for spread capture and inventory risk, not for having the best view on whether a drug gets approved. Its comparative advantage is speed and consistency; on the question of what is actually going to happen, it is frequently indifferent by design.
What it does mean is that the flow you are trading against is not a crowd of opinions. Reading a price as 'what people think' is a reasonable approximation on a deep, active market and a poor one on a quiet market where most of the resting size belongs to two programs earning a subsidy.
The rest of this guide
The open part covers what the mechanism is. What follows is how to use it against the people and programs already trading in the book.
Reading the book to see who is actually there
How to read the book itself to tell whether your counterparty is a subsidised quote or a directional participant - and what each one implies about your fill.
What survives the machine, and where your edge actually sits
Which mispricings survive an automated counterparty and which never reach you - and the three market conditions where the human side of the book is at its weakest.
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Create an account and subscribe to read the rest — how to tell who you are trading against, and which mispricings survive an automated counterparty.
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See the depth behind a price
Market Guy shows volume, spread and the 24h move on every market, which is where the signatures in this guide become visible.
Open the dashboardFrequently asked questions
- Am I trading against bots on prediction markets?
- Frequently, yes — and usually against market makers rather than opponents. They post both a buy and a sell price, aim to end the day flat, and earn the spread instead of taking a view on the outcome.
- Do the venues pay market makers?
- Openly, with published formulas. Polymarket pays liquidity providers automatically for posting limit orders, with rewards paid to maker addresses daily and over five million dollars distributed in a single month across sports and esports. Kalshi runs an equivalent program that pays for resting orders even when they never fill.
- Does that mean the price is manipulated?
- No. A subsidised market maker quotes tightly around the existing consensus rather than pushing the price anywhere, so the subsidy tends to make prices more accurate rather than less. What it changes is how you read a fill — a quoting program taking your trade is not disagreeing with you.
- Why do spreads widen before big announcements?
- Because market makers step back from risk they cannot price. The moments you most want to trade — right before a scheduled release, during a fast-moving event, when a resolution question turns ambiguous — are exactly when the subsidised counterparty is least willing to be there.
Keep learning
Prediction markets carry real risk of loss. Nothing on Market Guy is financial advice — it is research tooling to help you think, not a signal to trade.