ForecastEx’s Zero-Fee Claims Hide a Ruinous Market Structure
Interactive Brokers built their empire on low fees. Their new prediction market does the opposite - while claiming to charge nothing.
Interactive Brokers (IBKR) prominently advertises "0.00 fees per contract" on their new ForecastEx prediction market platform. But buried in their CFTC rulebook is a fee structure that not only exists - in some scenarios it makes trading practically impossible. It’s suffocating the exchange they’ve worked to build.
Technically, they don't charge a "fee." Instead, they've built a hidden cost into their bid-matching structure, buried in their rulebook:
When the combined Bids for the "Yes" Position and "No" Position equal $1.01, the Exchange executes the Forecast Contracts by pairing the Bids.
That extra penny above $1.00 is effectively a transaction fee - and its implications are devastating for market quality.
Exchanges typically tilt costs in the maker’s favor
Most exchanges charge fees primarily to traders who take liquidity (takers), while giving rebates to those who provide it (makers). This makes sense: market makers are like currency exchange booths at airports - they maintain constant buy and sell quotes so traders can execute immediately without hunting for a counterparty. They’re providing a service to the exchange and should be compensated for that.
And on top of being a service provider, they face another challenge: adverse selection. Just as a currency exchanger risks losses when savvy traders rush to sell a currency that's about to depreciate, market makers face constant adverse selection from better-informed traders who pick off their quotes. This fundamental disadvantage to being a maker, combined with the cost of maintaining continuous quotes, is why exchanges incentivize liquidity providers with rebates or refrain from charging makers a fee at all.1
But ForecastEx implicitly splits their pseudo-fee equally between makers and takers. This structure actively punishes liquidity provision - precisely the opposite of what a nascent market building liquidity needs.
Fixed fee + low prices = yikes
It gets even worse at the edges of the price range. Try to buy contracts trading at 1¢? Literally impossible2 - your counterparty would need to pay 100¢ to sum to $1.01. Even the most uninformed, fee-insensitive traders would not be down to pay 100¢ for the chance to win 100¢.
Even at 2¢, you're paying an implied half-penny fee per contract. Buy 1,000 contracts at 2¢ each? That's $20 for the position but $10 in total fees, implicitly split between maker and taker. The result is a 25% transaction cost that makes profitable taking nearly impossible at these price levels.
And forget about market-making (quoting both the bid and the ask) in prices below 10¢3. Consider buying 1000 contracts at 5¢ and then selling them at 7¢. While you captured a 2¢ spread for a $20 profit, in a normal exchange you could have quoted 4.5¢/7.5¢ and captured a 3¢ spread for $30 in profits, and probably even more after maker rebates. Instead, that extra penny per contract - $20 total - went straight to IBKR.
What makes this structure particularly baffling is that it's coming from Interactive Brokers - a company that literally built its empire by being the low-cost broker for serious traders. Their core customers are the most fee-sensitive traders in the market, meticulously optimizing their execution costs down to the penny. A double digit taker fee? They're more likely to convert funds into a stablecoin, VPN into Argentina, and trade fee-free on Polymarket!
The answer, of course, lies in the deception. By advertising "zero fees" while hiding the true costs in their market structure, IBKR hopes their sophisticated traders won't notice they're being fleeced. For a company that built its reputation on transparency and low costs, this fee structure wrapped in 'zero-fee' marketing rings hollow - and their sophisticated clientele will likely see right through it.
Fumbling the bag
It’s hard to overstate the value of having a DCM and DCO4 in August 2025. Polymarket just paid $112 million for just the licenses - there’s not even a working exchange or product in that deal. Prediction markets are poised to absolutely explode in volume with the onset of the NFL season. There are more than a dozen companies that are now racing to get their hands on their own CFTC licenses to start operating in the US, and it’s going to take them roughly two years to get started.
IBKR went through all of the pain of getting their own regulated event contract exchange and launched last year. Then Kalshi won a lawsuit for election markets and the CFTC is letting sports markets slide for now.
So, a cash cow has landed squarely in their laps. But IBKR insists on having a liquidity-defeating market structure, a mediocre event offering, and has made sure that practically no one has ever heard of ForecastEx.
On Monday, the entire exchange traded just $122,504 in volume, generating… and let me check my math here… ~rubs eyes~… yes, an eye-watering $1,225.04 in fee revenue.5
Why? Can they not feel the immense weight of the bag they are fumbling? Are they not looking over at Kalshi and thinking, “hm, a slice of that pie sounds nice”? Is Interactive Brokers utterly and hopelessly asleep at the wheel?
Do they think betting on sports and Taylor Swift are too low-brow? If yes, then why are they settling for a paltry sum in fees and not just selling this whole jawn to DraftKings for like $250 million?
Ten years from now, will MBA students be reading this blog post as part of a case study titled “How to blow a $50 billion dollar opportunity”?
I wouldn’t know. It’s not like it’s my job to predict the future or anything crazy like that.
It’s possible that IBKR is doing rebates on the back-end with whomever is contractually providing liquidity for them. While this is common with any type of exchange, doing it with this absurd hidden fee structure just isn’t really fair to regular folk who want to get into market making themselves.
It’s true - on the platform you actually cannot even place a bid for 1¢ contracts. It’s sad because buying 1¢ contracts to sell later for 10¢ is one of the great joys of prediction markets.
Or above 90¢ - the impact is symmetrical across the YES and NO contracts.
In a nutshell, this means the ability to run a prediction market exchange legally in the US. IBKR is one a handful of firms that have both a DCM and a DCO. You can learn more about the alphabet soup of this industry in my Regulation Primer.
According to my analysis of ForecastEx trade data.
Sounds like your gripe with ibkr is that it's a flat fixed fee vs. a percentage of the transaction. I agree with you that it's pretty egregious what they're doing, but it seems like this is something they could quickly adjust as they see fit.