Who wins and who loses in prediction markets? Evidence from Polymarket

vcf

We study trading gains and losses on Polymarket, the largest prediction market. Using 588 million trades ($67 billion in volume), we show that the gains are highly concentrated: the top 1% of users capture 76.5% of profits. Successful traders provide liquidity using limit orders that resolve favorably relative to realized outcomes while unsuccessful traders take liquidity using market orders. Monthly performance is weakly persistent, however, this may represent sample selection rather than skill. A detailed analysis of the trading behavior of the most successful accounts suggests that "insider'' trading is unlikely to explain the performance of the largest winners. Full dataset available at https://huggingface.co/datasets/vgregoire/polymarket-users

goncalo-r

What's the baseline here - in a world where every person is betting randomly X times a month, what would the distribution look like? There'd still be a small percentage that wins most of it, right?

manas96

Just curious but how are bets arbritated on these website? Meaning who decides if an outcome was yes or no? Answers to things like "Who will win the next Best Picture Oscar?" are fairly obvious and binary. Can we make bets whose answers are not binary yes/no? What about "Will celebraty X and Y break up?"? Does Polymarket go to X and Y to confirm if they broke up or something :D

perlgeek

> the top 1% of users capture 76.5% of profits This seems to be similar to OnlyFans, and the economy at large...

dwa3592

Wait- why isn't there any conflict of interest statement provided in this paper?

tim-star

the market wins

emsign

In terms of damage to society it's irrelevant who the winners are within the Polymarket system, it matters how much the insiders playing on Polymarket have an effect to the outside world of politics and economics. If Polymarket gambling increases corruption and destructive effects on society it simply has to be regulated or made illegal.

janalsncm

> We find that the most successful users traded frequently in sports markets, often for different teams (81% of the gains) Am I missing something or is this almost the whole story? Sports betting apps ban users who are too successful. Polymarket doesn’t. So if you have a killer football game prediction algorithm you’ll only be able to use it for so long on sports betting apps, but Polymarket won’t ban you. Plus the apps will limit the size of the bets you’re allowed to make.

EdKaim

Great paper. Still digesting after a first pass, but it looks really solid. Quick question: did your team consider the implications of capital recycling on the maker side? Liquidity providers tend to have superior tech and information, so the general edge is expected. However, the ability to effectively reuse the same capital to sell outcome sets seems like it could offer a scale advantage that enables them to capture even more opportunity. On the other side, takers expressing directional views have their capital committed to one position at a time. Do you think this contributes to the gains being so concentrated among them?

orsenthil

If the prediction markets are between people, why do people bet against the mostly likely outcome at all ? Real anecdote. For e.g, during Superbowl 2026. The markets were allowed bets to be placed until 6 minutes to close, when Seahawks were way ahead of New England Patriots. The probablity of Seahawks winning was almost 99% and any person who places a 1000 dollar bet will make 1100 in 6 minutes. Where is the 100 dollar going to come from? Who loses that?