Arbitrage is capturing a price inconsistency between related instruments rather than taking a view on an outcome. On prediction markets that usually means the two sides of one market, the same event on two venues, or two markets whose outcomes are logically linked.
True arbitrage is a claim about mathematics, not about the world, which is what makes it attractive to automate. The residual risks are execution risk (one leg fills and the other does not), funding risk (capital is locked until resolution), and resolution risk (two venues word the same question slightly differently and settle opposite ways).
That last one is the underrated hazard in cross-venue trades: the positions offset only if both markets resolve on the same interpretation of the same event.
Assuming two venues resolve the same event identically. Wordings differ in ways that only matter in edge cases, and an edge case is exactly when both legs will not offset.
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