Who Wins and Who Loses In Prediction Markets? Evidence from Polymarket

Department: Finance

Speaker: Pat Akey (Essec)

Room: T305

Who Wins and Who Loses In Prediction Markets? Evidence from Polymarket

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.