Opening Wide, Moving Fast: Polymarket Spread Dynamics

Abstract

Polymarket creates a new market for every event it lists, and each contract begins with an empty order book: no inherited orders, no assigned market maker, and no opening auction. Every contract there- fore has a clear opening moment and an early period during which its trading conditions are still forming. Using roughly 160,000 contracts cre- ated between October 2025 and March 2026, we study what it costs to trade in a market’s first hours of life and how that cost behaves across different kinds of events. Over the first twenty-four hours of each market, the genesis window, we measure how wide spreads start and how quickly they narrow, how much it actually costs to trade immediately, and how much of that cost stays with the liquidity provider versus reflecting the price moving after- wards. We compare these patterns across eight event categories. Trading costs are strongly category-dependent from the very first trade: sports markets open cheaply with deep, balanced books, while other categories open much wider and take longer to settle, with most of the narrowing happening within the first hour. Centrally, we document a dissociation: ranking categories by how expensive they are to trade and by how much early trades move the price produces two orderings that do not agree. These are separate properties, not two views of the same thing