Fees and Returns
LPs earn revenue from the spread on every position placed in their market. This page explains how fees accumulate and what drives LP returns.
How LPs Earn
Every time a trader takes a position, they pay a dynamic fee. This fee is embedded in the spread — the difference between the cost of buying both YES and NO tokens and the 1.00 USDC payout.
For example, if YES is priced at 0.57 and NO is 0.44, the total cost to buy both sides is 1.01 USDC. That 0.01 USDC per token pair is fee revenue that stays in the pool and accrues to LPs.
Fee Structure
Every position pays two independent fees:
1. LP Fee (Dynamic)
The LP fee adjusts based on market skew:
Balanced market
~1.0% (base fee)
Standard fee when demand is roughly equal
Crowded side
Up to ~5.0%
Higher fee on the popular side penalizes one-sided flow
Contrarian side
As low as 0.25%
Lower fee incentivizes balancing flow
This fee stays in the contract and accrues to LPs at withdrawal.
2. Protocol Fee (Flat)
A flat 2% fee is charged on every position and transferred immediately to the protocol treasury. This fee is independent of market skew and funds protocol development and operations.
Combined Example
For a 100.00 USDC position in a balanced market:
LP fee (~1%): ~1.00 USDC → stays in the pool for LPs
Protocol fee (2%): 2.00 USDC → sent to protocol treasury
Net USDC buying tokens: ~97.00 USDC
What Drives Returns
LP returns depend on two factors:
1. Trading Volume
More positions placed = more fees collected. A market that sees 50,000 USDC in total volume generates far more fees than one with 5,000 USDC. Markets with high interest (close matchups, popular teams, significant events) tend to attract more volume.
2. Utilization
Utilization measures how much of the LP pool is being used to back open positions. Higher utilization means the pool is working harder and generating more fees relative to its size.
Utilization = Total Open Interest / Pool Size
Low (< 20%)
Pool is mostly idle. Fee generation is low relative to capital committed.
Medium (20–60%)
Healthy market activity. Pool is generating meaningful fees.
High (> 60%)
Pool is heavily utilized. Fees are strong, but new positions may be constrained by risk limits.
Returns Are Variable
LP returns are not guaranteed. There is no fixed APY. Returns depend entirely on how much trading activity the market sees before resolution. A market that attracts heavy volume can generate significant fees for LPs. A market with little interest may generate minimal returns.
LP deposits are locked until after resolution. You cannot withdraw mid-market. Evaluate the market's likely trading interest before committing capital. See Depositing and Withdrawing for details on the withdrawal timeline.
Last updated