> ## Documentation Index
> Fetch the complete documentation index at: https://docs.sporttoken.app/llms.txt
> Use this file to discover all available pages before exploring further.

# Market fee

# Market Fee (Dynamic Risk Fee)

The market fee is a dynamic fee that scales with how much risk your bet adds to the vault.

## How It's Calculated

```
Market Fee Rate = (Vault Exposure After Bet - Vault Exposure Before Bet) / Total Vault Assets
```

Capped at **3%** maximum.

## The Logic

When you bet on a side that already has heavy action:

* Your bet increases the vault's potential loss if that side wins
* The fee compensates for this added risk
* Fee rate increases as exposure approaches the 3% cap

When you bet on the underbet side:

* Your bet reduces the vault's net exposure
* Instead of a fee, you may receive a **rebate**
* Rebates incentivize market balancing

## Example: Adding to Imbalance

**Setup:**

* Vault: \$100,000
* Current exposure: \$1,000 on Team A (1%)
* You bet \$500 on Team A at -110 odds

**Calculation:**

* Your bet adds \~\$454 to Team A exposure
* New exposure: \$1,454 (1.45%)
* Average fee rate: (1% + 1.45%) / 2 = 1.23%
* Market fee: $500 × 1.23% = $6.15

## Example: Reducing Imbalance (Rebate)

**Setup:**

* Vault: \$100,000
* Current exposure: \$2,000 on Team A (2%)
* You bet \$500 on Team B at +110 odds

**Calculation:**

* Your to-win amount: \$550
* This offsets \$550 of Team A's exposure
* New imbalance: \$1,450 (1.45%)
* Rebate rate: (2% + 1.45%) / 2 = 1.73%
* **Rebate earned: $500 × 1.73% = $8.63**

Your net cost = 0.3% system fee - $8.63 rebate = **-$7.13\*\* (you profit!)

***

## Rebate Deep Dive

### When Do You Get a Rebate?

You earn a rebate whenever your bet **reduces** the vault's net exposure:

| Current Heavy Side | Your Bet | Result                  |
| ------------------ | -------- | ----------------------- |
| Team A             | Team B   | ✅ Rebate                |
| Team B             | Team A   | ✅ Rebate                |
| Balanced           | Either   | No rebate (but low fee) |

### Rebate Formula

```
Rebate = Bet Amount × Average Reduction Rate
```

Where:

```
Average Reduction Rate = (Rate Before + Rate After) / 2
Rate = Imbalance / Vault Assets
```

### Partial Derisking

If your bet is larger than the current imbalance:

1. **First portion** earns a rebate (derisking segment)
2. **Remaining portion** pays a fee (creating new imbalance on opposite side)

**Example:**

* Imbalance: \$1,000 on Team A
* You bet \$2,000 on Team B
* First \$1,000 of to-win: earns rebate (eliminates imbalance)
* Remaining to-win: pays fee (creates Team B exposure)

### Maximum Rebate

Rebates are capped at 3% (same as fees), so the maximum rebate is:

```
Max Rebate = Bet Amount × 3%
```

***

## Fee Recycling

Market fees collected are made available to users who take the opposing side, further incentivizing balanced markets. This creates a virtuous cycle:

1. Fees from imbalance-adding bets → Pool
2. Pool funds rebates for imbalance-reducing bets
3. Result: Naturally balanced markets with minimal vault risk