Pricing engine
LMSR — Logarithmic Market Scoring Rule
An automated market maker that always quotes a price, with a bounded, mathematically guaranteed house edge.
LMSR is an automated market maker: it always quotes a buy and sell price for every outcome, so players never wait for a counterparty. The scoring rule bounds the operator's worst-case loss, and the edge comes from configurable bet fees plus the market maker's surplus.
How it works
- 1
Every outcome has a live price derived from the LMSR cost function — no order book, no waiting for a matching bet.
- 2
The maximum subsidy (worst-case operator loss) is bounded and configurable up front, so exposure is known before a market opens.
- 3
Edge is earned through configurable bet fees (casino + platform) and optional win fees on payouts, plus market-maker surplus — targeting ~3%.
- 4
Players can sell shares back to the market to cash out early, full or partial, with a real-time fair-value preview.
Best for
Operators who want continuous liquidity and instant fills on long-tail or low-volume markets without running a bookmaking desk.
Risk controls
- Bounded maximum subsidy per market
- Per-user and per-market bet limits, maximum payout caps
- Correlated-exposure tracking across market groups
- Emergency kill switch that suspends all betting in one query
Frequently asked
- How does LMSR guarantee a house edge?
- The edge is not left to chance: it comes from configurable bet fees and the market maker's surplus, while the LMSR cost function caps the operator's worst-case subsidy. You configure both before a market opens.
- Do players need a counterparty to bet?
- No. LMSR is an automated market maker, so it always quotes a price for every outcome — players get instant fills even on thin markets.
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