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Who wins and who loses in prediction markets? Evidence from Polymarket
- vcf 4mo agoWe 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 https://huggingface.co/datasets/vgregoire/polymarket-users
- wutwutwat 4mo agoinsider trading on events probably wouldn't show any trends, right? These are point in time events (they call them markets), but they are finite and short lived. An insider would be a one and done thing, so it would be pretty hard to spot them or trend any sort of month over month insider scheming imo. Also... > We study trading gains and losses on Polymarket, the largest prediction market This is not a natural thing to say and I fucking hate that it's impossible to know anymore if I'm wasting time replying to an AI/bot or not
- philipwhiuk 4mo agoI agree - you're not going to be an insider on a significant proportion of trades and it would be stupid to use the same account for more than a couple. Insiders are going to be earning large amounts in single trades, either by betting a lot when it's odds-on or a small amount when it's out the odds (for a large return). I think it's just bad tense, which I think makes it not AI amusingly.
- vcf 4mo agoNot meant to sound like AI, but most academic journals limit abstracts to 100 words, so they rarely feel natural... I agree: insiders are hard to study because they are finite and short-lived. We're pretty confident there are insiders out there trading on Polymarket; however, our conclusion is that they don't account for a significant fraction of the total trading gains on the platform.
- eloisant 4mo agoWhen the abstract is limited, you don't add useless qualifiers like "the largest prediction market"
- michaelt 4mo agoSome people feel strongly about defining jargon when using it - an article on here [1] the other day about Capture The Flag (CTF) hacking puzzle competitions was full of comments comparing the article didn’t say what CTFs were. [1] https://news.ycombinator.com/item?id=48157559 https://news.ycombinator.com/item?id=48157559
- ashdksnndck 4mo agoThis is a familiar style in abstracts. Weird as it sounds, it’s normal to have some language implying the reader is a hermit living in a cave. If it sounds like something an AI would say, maybe it’s because models have been trained on academic papers?
- janalsncm 4mo agoIt’s not a useless qualifier. Many readers might not know that Polymarket is the biggest now, and if at some future date it’s not the biggest anymore the statement makes it clear why they studied at this time.
- hammock 4mo agoThis is true if the stock market as well. There is insider trading. But that vast, vast majority of profits are made by the market makers (citadel etc).
- LPisGood 4mo agoFor what it’s worth that’s a sentence I would write if that were my paper and I was writing the abstract.
- wutwutwat 4mo agoExcept this was a comment on hacker news, not an academic paper... on an article talking about prediction markets. The context already exists, and there isn't any reason to tack that onto the end of what was said, and it doesn't matter for that sentence or the entire comment. Just feels like something a agent being overly verbose/descriptive would say. Another possibility could be that SEO for LLMs is now a thing, and keyword stuffing or model manipulation is going to take subtle things like `We study trading gains and losses on Polymarket, the largest prediction market.` and interpret that as fact, in order to, idk what to call it, trick?, brainwash? the model into internalizing "polymarket is the largest" into its trained dataset and then proceeding to recommend polymarket to people when they ask about prediction markets, even if isn't true anymore at that time.
- karlmedley 4mo agoThe comment is the abstract of the paper verbatim. This is one of the authors posting their paper on HN, sharing their data, and answering questions. This not just normal and respectable behaviour, it's really cool.
- redox99 4mo agoThe spreads on most markets always seemed like a hint that polymarket transferred wealth from the impatient that don't really understand how it works, to those that play mostly as patient market makers with just an educated guess. The problem is that volume is generally too low to make significant money.
- chmod775 4mo agoThe only time I'd trade on that platform is when I have information others don't. I assume that is also true for those 1% farming suckers.
- superfrank 4mo agoI'm not saying this as an argument for or against prediction markets, but that's essentially what the vig is at traditional sportsbooks. Someone calculates what they think the odds of an outcome happening are and then they allow people to take positions on either side at worse odds than what they think the real odds are. As long as their prediction is correct, over time they make money. It's why putting $1 on a 50/50 bet on a sportsbook will usually only pay out around $1.91 instead of $2 if you win.
- graemep 4mo agoThat sounds as though the successful traders are informally acting as market makers and are rewarded for doing that.
- vcf 4mo agoYes. It's not only that, as we also find very successful traders who take directional bets on elections and sports. But among the most successful traders, a large fraction are acting as market makers. Note that acting like one is not enough. We also find many traders acting as market makers among the least successful, yet they don't lose as much as the top winners do.
- zero_bias 4mo agoActually it’s pretty explicitly stated, polymarket even have special docs section, "market maker guide"
- SamTinnerholm 4mo ago[flagged]
- empath75 4mo agoThere's probably also some hedging going on across accounts that look like directional bets.
- deleted 4mo ago[deleted]
- postflopclarity 4mo agothis comment was clearly written by AI. please don't do that.
- Retr0id 4mo agoNot sure why you were downvoted/flagged, because you're right. It is also quite an insightful comment worthy of discussion so I'm a little conflicted.
- skybrian 4mo agoI don’t see why it’s AI, but even if it is, it’s better than most human comments so the complaint should be downvoted.
- Retr0id 4mo agoTake a look at the user's history, it's more obvious in context. It has a lot of claude-specific tells which are noticeable if you've spent time working with claude. AI-generated comments are against the HN guidelines https://news.ycombinator.com/newsguidelines.html#generated https://news.ycombinator.com/newsguidelines.html#generated
- skybrian 4mo agoMaybe the guidelines should be changed? Something about: don’t complain about comments just because they’re AI.
- goncalo-r 4mo agoWhat'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?
- vcf 4mo agoWe don't know the exact benchmark, but your insight is correct. We provide a simulation similar to what you have in mind towards the end of the paper, but you can generate almost any distribution you want by fine-tuning a simulation...
- Terr_ 4mo agoTo relate it to a more-general economic article that has stuck with me for a while: > If you simulate this economy, a variant of the yard sale model, you will get a remarkable result: after a large number of transactions, one agent ends up as an “oligarch” holding practically all the wealth of the economy, and the other 999 end up with virtually nothing. https://www.scientificamerican.com/article/is-inequality-inevitable/ https://www.scientificamerican.com/article/is-inequality-ine...
- manas96 4mo agoJust 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
- matusp 4mo agohttps://docs.polymarket.com/concepts/resolution https://docs.polymarket.com/concepts/resolution
- manas96 4mo agoInteresting. Any (in)famous UMA vote debates? Or interesting Unknown/50-50 outcome resolutions?
- FabHK 4mo agoCheck Matt Levine's excellent "Money Stuff" column. He dissects a few examples (Ayatollah Khamenei, a recent public referendum, maybe more).
- backwardsponcho 4mo agoFirst one that came to mind: https://www.theguardian.com/world/2026/jan/07/wager-platform-polymarket-will-not-pay-out-on-bets-on-us-invasion-of-venezuela https://www.theguardian.com/world/2026/jan/07/wager-platform...
- myroon5 4mo agohttps://www.wired.com/story/volodymyr-zelensky-suit-polymarket-rebellion/ https://www.wired.com/story/volodymyr-zelensky-suit-polymark...
- deleted 4mo ago[deleted]
- superfrank 4mo ago
- perlgeek 4mo ago> the top 1% of users capture 76.5% of profits This seems to be similar to OnlyFans, and the economy at large...
- vcf 4mo agoYes, power laws are everywhere. The exact shape of each distribution varies, however, and little is known empirically about the distribution of trading profits in financial markets.
- amelius 4mo agoYeah if you look at the Boltzmann Wealth Model, where every actor gives away 1 dollar to a random person, and you repeat this, then if you start with an equal wealth distribution, you end up with an exponential wealth distribution. That shows how strong exponential curves are :) A few "lucky" individuals become very wealthy, while the vast majority of people end up with very little or nothing. The effect is so strong that I'm starting to wonder if we should have laws against power laws, like we have in engineering when we try to make things stable.
- Balgair 4mo agoI mean, do we want the economy to be stable? Not in a 'oh the rich don't so they control the media and so we don't' sorta way. But like in a 'lets educate people on the pluses and minuses, debate a while, and then come to an informed conclusion' sorta way. Like, deep down, does the average person actually want a stable economy? Because it seems to me that there is an even split historically between the folks that want stability and a little patch of land and weekly rhythms, and the folks that just want to drunkenly burn couches in the street every full moon, or some such thing. Not to be glib here at all. I like, would actually like to know the answer. Sorry if this comes off the cuff seeming.
- pstuart 4mo agoI have a dumbed down version of this question as variant of the Voight-Kampff test (Bladerunner) that goes like this. You have 2 choices for how the world is shaped, pick 1: A. You have a modest but comfortable home, a job that pays you enough so that you have what you need and can afford occasional luxuries (e.g., an annual holiday abroad), have good health insurance, access to education and childcare, etc. Everybody else has the same thing, and because of this you live in communities where the arts flourish because nobody has to worry about becoming homeless or destitute. B. You live in magnificent mansion, one of dozens you own around the world (accessible via one of your personal Gulfstream jets). You have more money then you could ever spend in a lifetime (even recklessly). Your homes are staffed with obedient servants who cater to your every desire. I mean anything. You own them. Your mansions are on palatial estates with secure walls and guards to keep out the rabble outside -- who fight for scraps and are desperate enough to do any kind of work to keep your factories humming and printing cash. I wouldn't hesitate to choose A because that's a world I'd love to live in and the world of B horrifies me. I don't say this as virtue signaling, it's my innate reaction. I think that a significant portion of the population would love to choose B. And in some ways, some already have.
- dwa3592 4mo agoWait- why isn't there any conflict of interest statement provided in this paper?
- vcf 4mo agoBecause it's not required and not common practice in our field at this stage. But none of us (I'm one of the authors) is affiliated with or has a financial interest in any prediction market platform.
- dwa3592 4mo agoThanks for the clarification. Given the scrutiny on these platforms, this is timely done. Thanks.
- HWR_14 4mo agoIsn't it common practice and required to disclose a conflict of interest? Just not to explicitly say there are none.
- vcf 4mo agoYes, when you submit for publication. In our field, you rarely see one for pre-prints, unless you have one to disclose.
- tim-star 4mo agothe market wins
- emsign 4mo agoIn 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.
- jdw64 4mo ago[dead]
- nbltt 4mo ago[dead]
- janalsncm 4mo ago> 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.
- ericmcer 4mo agoI always wondered if you could compare odds on the most advanced sports betting apps and those on futures markets and exploit any big diffs between the two.
- hunterpayne 4mo agoThere are people who have been doing this in Vegas for years.
- dnnddidiej 4mo agoThat makes you a profitable bettor, so your accounts will get restricted. Best way to make money is if you have better predictions then bet on markets like totalisers, betfair etc. not with casinos or bookmakers.
- edge_trader_41 4mo ago[flagged]
- feurio 4mo agoI have absolutely zero knowledge about the area, but doesn't Polymarket just set up bets between users? If you're a regular bookmaker, who is on the hook for any losses, then yes you would ban successful users. But in this case you just skim off a fee for each "trade" so there's no incentive to ban anyone.
- elkrapo 4mo agoIt doesn't seem surprising that being a bookmaker in your behavior on sports is a big win since many people bet on identity instead of information in sports and with small bets/attention. It's interesting in that the pattern could have turned out to apply immediately across everything or something.
- EdKaim 4mo agoGreat 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?
- vcf 4mo agoThanks! No, we haven't looked at the capital "locked" in these markets (which is important considering there is no margin trading, at least not yet). Most markets have a short horizon, but some have very long ones. It gets very complicated very quickly because it's not always the case that you open a position and then close it (you get partial fills, users closing partial positions, etc.). Taking that into consideration would make liquidity providers look even better than they do in our study. Not having their capital locked allows liquidity providers to trade more and earn more per trade on average. Trading on margin would allow liquidity takers to lose more money more quickly (this is an educated guess; you never know what the outcome of a new policy would be until you implement it).
- EdKaim 4mo agoThe long horizon ones are also interesting on Polymarket because the vast majority don't have APY. As a result, prices should be discounted, but sum-to-1 doesn't allow for it. I'd expect a negative skew to the performance of traders willing to take those inflated prices (relative to what the odds DCF imply they should be). But there's also no upside for makers, so liquidity is pretty thin.
- nrb23 4mo ago[flagged]
- orsenthil 4mo agoIf 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?
- Jensson 4mo ago[dead]
- philsquared_ 4mo ago$1000 would return $1010. The money comes from people who want to close their trades early rather than wait for the market to settle. Often times no one actually takes these offers and then it just sits in the order book.
- orsenthil 4mo agowow! excellent explanation. Thank you!
- moezd 4mo agoSo the market is still being built: Whales come in with educated guesses, use limit orders like responsible adults and take cash home. Daredevils, amateurs and gambling addicts come in, go all-in and try to time the market, which probably never works. %1 -> 76.5% is huge, in terms of Gini coefficient it's like living in Brazil, right?