Vig

Vig (short for vigorish, also called juice or the take) refers to the margin built into odds or prices that ensures the house profits regardless of outcome. In traditional sports betting, a bookmaker might price a coin-flip event at -110 for both sides, meaning you must bet $110 to win $100. This 10¢ overround means the implied probabilities sum to ~109% instead of 100% — that excess 9% is the house edge.

Prediction markets differ fundamentally from traditional sportsbooks in their vig structure. Well-designed markets aim for zero house edge, with the exchange instead charging flat transaction fees on trades (Polymarket charges 2% on profits; Kalshi charges a similar transaction fee). The prices themselves should reflect true probability estimates without a built-in margin, since the exchange is neutral between outcomes.

However, even zero-vig prediction markets have implicit transaction costs: the bid-ask spread represents a form of friction that benefits market makers at the expense of traders. In illiquid markets with wide spreads, the effective cost of a round-trip trade (buy then sell) can be comparable to a traditional sportsbook's vig. Evaluating the true cost of participating in any prediction market requires examining both explicit fees and implicit spread costs.