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State of Play’s TL;DR
- A Yale and London Business School working paper found 3% of Polymarket accounts captured 27% of all profits.
- Researchers looked at 1.72 million accounts.
A Yale- and London Business School-authored working paper found that about 3% of Polymarket accounts captured 27% of all dollar profits across two years of trading activity.
It suggests that a small group of traders may have persistent skill, but also that growing competition is making prediction market prices more efficient and harder to beat. For casual users, that could mean fewer obvious mispricings but potentially better market pricing overall.
The paper analyzed 1.72 million accounts across 210,322 markets on Polymarket. The researchers used a statistical test that reran each trader’s history thousands of times to help separate skill from luck.
Yale economist Theis Jensen said competition from skilled participants can improve market pricing.
“If you have a lot of skilled people, then they compete, and in doing so, they make prices more correct.”
Study points to tighter, more competitive prediction markets
The number of consistently skilled traders could shrink as more sophisticated participants enter the space. Jensen said he expects the share of skilled traders to fall from roughly 3% to below 1% as competition increases.
That lines up with comments in the report from Julie Hoover, a Bank of America equity analyst, who said tighter spreads make mispricing harder to find. The article said institutional money is narrowing arbitrage-based strategies in prediction markets, reducing some of the easiest profit opportunities for active traders.
In practical terms, that means prediction markets may be becoming more efficient. A market with tighter spreads and fewer pricing errors is generally harder for traders seeking edge, even if it may produce more accurate odds.
Polymarket findings fit a broader prediction market trend
Kalshi is another example of prediction markets gaining credibility as forecasting tools. Federal Reserve researchers found that Kalshi’s macroeconomic contracts matched or outperformed standard forecasting benchmarks.
Kalshi’s headline inflation forecast beat the Bloomberg consensus. That does not directly measure trader profitability on Polymarket, but it supports the broader idea that prediction markets can improve as competition and participation deepen.
Based on reporting by Darryn Pollock for BeinCrypto.
