Prediction Markets Squeeze Trader Edge as 3% of Accounts Capture 27% of Profits
Updated
Updated · CNBC · Sep 14
Prediction Markets Squeeze Trader Edge as 3% of Accounts Capture 27% of Profits
3 articles · Updated · CNBC · Sep 14
Summary
$13.76 billion of Polymarket trades analyzed in a new paper showed just 3% of accounts captured about 27% of dollar profits by repeatedly correcting prices toward eventual outcomes.
Those skilled traders won by reacting faster to public news, arbitraging related contracts and trading against behavioral errors, but Wall Street participation is expected to erase those gaps more quickly.
Yale economist Theis Jensen said the share of traders with a durable edge could fall from 3% to below 1%, leaving only the very best—potentially hedge funds—able to beat broad prediction markets.
Smaller specialists may still profit in niche, thinly traded contracts where large institutions face scale limits and can move prices enough to destroy their own edge.
For platforms and less-skilled users, tighter pricing is a benefit: more institutional volume can lift fees, and better-calibrated contracts may strengthen prediction markets as forecasting, hedging and market-data tools.