As Justin Wolfers noted, maybe there are today bigger practical obstacles to prediction market arbitrage.

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Legal restrictions for US traders on foreign prediction exchanges (BetFair, etc.)-

Transaction fees (you would need to operate on 2 exchanges)-

Currency risks and cost for hedging on that.

Eric Crampton (a Canadian exiled in New Zealand) says he has managed to turn a buck, though, by arbitraging between InTrade and iPredict New Zealand. He also makes 2 theoretical points. Go read it.

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