The reality is that only 0.1% wins and almost everyone loses

In recent years, so-called prediction markets such as Kalshi and, above all, Polymarket. Here you can bet on all kinds of things happening today and get rich, or that’s what they advertise. The reality is very different.

67% for the 0.1%. A Wall Street Journal analysis has revealed that in Polymarket, as in the world in general, only a small group shares most of the profits. The analysis, which covers 1.6 million accounts and took data from 2022, concludes that 67% of all profits generated have been distributed among only 2,000 users, which represents 0.1% of the total. In figures, we are talking about about 500 million dollars, so each of these users amounts to 250,000 dollars. Not bad.

The rest. What is left over from the profits is much more competitive and is distributed among approximately a third of the total users analyzed. The striking thing is in the largest portion of the pie, which are users who not only are not earning, but are losing money. At Kalshi, a competitor of Polymarket, the ratio of profitable to unprofitable users is 1 to 2.9. That is to say, for every person who earns money, there are almost three who are losing. In other words, many finance the party of a few.

The winners. Who is behind that 0.1%? They are not ordinary people with a good eye, but professional traders and ‘quant firms’ that work as a team and buy data sets in real time at very high prices. With this information they feed algorithms that execute tens of thousands of operations a day, hunting for price microvariations that a normal user would miss. Many also act as ‘market makers’: they constantly set purchase and sale prices, pay fewer commissions and even charge incentives for providing liquidity.

The losers. The typical Polymarket user is in the red between $1 and $100, but of all of them there are 10% with losses of $4,000 on average. They are casual users who make decisions guided by intuition or by what they want to happen, based on superficial information. What ends up happening is that your money ends up in the hands of that small professional group.

Disguised gambling addiction. Prediction markets like Polymarket have managed to give a financial appearance to what is essentially still a game of chance. Lifelong bets are presented as informed investments, disguising gambling addiction under trading language. We can call it whatever we want, but the reality is that for many users, the losses are very real.

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In Xataka | We have a problem with Polymarket: it has become the Bet365 of geopolitics without any regulation