How to Earn Passive Yield as a Liquidity Provider on Prediction Markets

While most traders chase volatile price swings, a steady stream of income flows to liquidity providers—the essential backbone of every prediction market. By supplying the capital that enables smooth trading, you can earn consistent yield from fees and incentives.

This guide breaks down exactly how to become a liquidity provider across the top prediction platforms, comparing their rewards, risks, and the step-by-step processes you need to get started.

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Understanding Prediction Market Liquidity

At its core, providing liquidity means you’re making it easier for others to trade. Platforms reward this service in two main ways:

1. Automated Market Makers (AMMs - Worm.wtf, Polymarket Pools) You deposit a balanced pair of assets (like “Yes” and “No” shares) into a smart contract pool. This pool automatically facilitates trades, and you earn a percentage of every fee.

2. Order Books (Kalshi, Augur) You place “resting” limit orders (bids to buy and asks to sell) on a traditional order book. You earn from the spread between prices or through specific incentive programs for market makers.

The best platform for you depends on whether you prefer the automated, permissionless nature of DeFi or the structured programs of regulated platforms.

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Platform Breakdown: Where to Provide Liquidity

🦄 Polymarket (Hybrid Model)

Polymarket combines an order book with AMM pools for high-volume markets. Its liquidity programs are often invite-only for major events, offering a share of trading fees plus bonus rewards.

• Best For: Patient capital seeking institutional-grade volume.
• Current Opportunity: Fee-sharing pools around major geopolitical or crypto events.
• Getting Started: You can join the platform via this link and monitor their official channels for program announcements.

🐛 Worm.wtf (Bonding Curve AMM)

Built on Solana, Worm.wtf uses bonding curves where early liquidity providers can get in at lower prices. Rewards come from creator-set fees on trades.

• Best For: Agile capital chasing higher APYs on trending, viral markets.
• Current Opportunity: Pre-sales and early bonding curve phases for crypto/political topics.
• Learn More: What Is Worm.wtf? The Complete Beginner’s Guide

📊 Kalshi (Regulated Order Book)

As a CFTC-regulated U.S. platform, Kalshi runs a traditional order book. It incentivizes liquidity through a transparent Liquidity Incentive Program (running through Sep 2026) and an elite Market Maker program.

• Best For: U.S.-based participants wanting a regulated environment with clear daily rewards.
• Current Opportunity: Daily incentive programs in major politics and economics markets.
• Learn More: What Is Kalshi? The Complete Beginner’s Guide

🔮 Augur (Decentralized Order Book)

The pioneer of decentralized prediction markets, Augur relies on a peer-to-peer order book. Providing liquidity is more manual, involving creating and posting your own bids and asks.

• Best For: Decentralization purists and those trading in niche markets.
• Current Opportunity: Manual market making in less-competitive, long-tail markets.
• Learn More: What Is Augur? The Complete Beginner’s Guide

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Risk Assessment: What Could Go Wrong?

Providing liquidity isn’t free money. Here are the key risks:

• Impermanent Loss (AMMs): The value of your pooled assets can decrease compared to simply holding them if prices diverge significantly.
• Low Volume / Capital Erosion: In an illiquid market, your capital sits idle, earning minimal or no fees while still being at risk.
• Platform & Smart Contract Risk: Bugs in a protocol’s code or sudden regulatory changes can lead to loss of funds.

🛡️ Mitigation Strategy: Start small, stick to high-volume markets on reputable platforms, and never allocate capital you can’t afford to lock up.

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Step-by-Step Action Plans

Providing Liquidity on Worm.wtf

1. Connect a Solana wallet (Phantom, Backpack).
2. Navigate to a market in “Pre-Sale” or with an active bonding curve.
3. Deposit USDC—it’s automatically converted into a balanced position on the curve.
4. Earn a proportional share of all trading fees.
5. Exit at any time by withdrawing your share from the pool.

Providing Liquidity on Kalshi

1. Sign Up & Verify: Complete KYC at kalshi.com.
2. Fund Account: Deposit minimum $1.
3. Place Limit Orders:
   • To add a Bid: Set a “Buy Yes/No” Limit price below the current ask.
   • To add an Ask: Set a “Sell Yes/No” Limit price above the current bid.
4. Earn Rewards: Eligible resting orders automatically qualify for the daily Liquidity Incentive Program payouts.

Providing Liquidity on Polymarket

1. Get Access: Join the platform to get on the radar for programs.
2. Watch for Drops: Monitor Polymarket’s Discord and X for liquidity pool announcements.
3. Deposit & Earn: If selected, deposit USDC into the specified AMM pool to begin earning fee shares and potential bonus tokens.

Providing Liquidity on Augur

1. Use the Augur interface or a compatible dApp (like Matcha).
2. For a chosen market, manually create and post both “Yes” and “No” limit orders to create a two-sided market.
3. Earn the spread when your orders are filled by other traders.

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Who Should (and Shouldn’t) Provide Liquidity?

✅ You’re a good fit if you…

• Have at least a mid-four-figure portfolio to allocate.
• Are comfortable with intermediate DeFi concepts.
• Value consistent yield over home-run trades.
• Have the patience to monitor and manage positions.

❌ You might want to wait if you…

• Are a complete beginner to crypto (master wallets and basic swaps first).
• Have a small portfolio where gas/transaction fees would eat your profits.
• Need immediate access to your capital.
• Are purely seeking short-term, speculative gains.

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Final Verdict: Your Quick Start Path

1. Start Small & Learn: Begin with a Worm.wtf pre-sale using a small amount to understand bonding curves.
2. Scale with Structure: Move larger, patient capital into a Polymarket or Kalshi incentive program for more reliable, volume-based yield.
3. Specialize: Use Augur for specific, niche markets where you have an edge.

Liquidity providing in prediction markets offers one of the more compelling risk-adjusted yields in crypto today—but only for those who understand and respect the unique risks involved.

Ready to go deeper? Explore our full suite of guides in the Prediction Markets category.