NegRisk Multi-Outcome Arbitrage on Polymarket

How It Works Polymarket's NegRisk framework allows multi-outcome markets (e.g., 'Which candidate wins state X?') where the probabilities of all mutually exclusive outcomes must sum to exactly 1.00. When market inefficiencies cause the sum to deviate — either above (over-round) or below (under-round) — a risk-free position can be constructed by shorting the overpriced basket or buying the underpriced basket of all outcomes.

Entry/Exit Conditions An async Python scanner continuously monitors all active NegRisk markets. Entry is triggered when the sum of best-ask prices across all outcomes falls below a threshold net of fees (under-round: buy all outcomes for guaranteed profit) or when the sum of best-bid prices exceeds 1.00 net of fees (over-round: sell all outcomes). Exit is automatic at market resolution.

Verified Results The repository (matthewnyc2/arbitrage) claims 60 passing unit/integration tests and includes both paper-trading mode and a live browser demo, suggesting a production-grade implementation with validation. No live P&L figures are disclosed.

Implementation Notes Built on Python asyncio for concurrent scanning of multiple markets simultaneously. Paper-trading mode allows safe validation before live deployment. The scanner architecture must handle Polymarket's CLOB API rate limits and manage partial fills across multiple outcome legs within a single market. Gas/USDC bridging costs must be factored into threshold calculations.

Risks Opportunities may be small and fleeting, requiring fast execution. Partial fills across outcome legs leave residual directional risk. Polymarket could update NegRisk contract mechanics, changing the arbitrage structure. Liquidity in lower-probability outcomes may be insufficient to complete the full basket trade.