The prediction markets – platforms where users bet on whether events will occur – pretend to be populist, pushing the nabobs aside and representing the “wisdom of the crowd”. But in fact, the markets are controlled by a few, skillful traders. Their users are led to believe they can strike it rich.
But like gamblers everywhere, most of them lose most of the time, while enriching the casino and bankrolling the winner’s takings. The markets pretend honesty and transparency, but they open the door to fraud and insider trading. Like opinion polls, they affect voters’ expectations of the outcomes of elections but make them no smarter about whom to vote for.
Fundamentally, the assumptions projected by the prediction markets are Trumpian. The companies suggest that their results are improved by the financial stake customers have in them. When money talks, in other words, its message is more authentic and valuable than mere political speech.
The prediction markets made a better collective call on the 2024 elections than conventional polls and pundits, particularly in the swing states. The authors of a much-cited 2025 study from Vanderbilt University infer that their results – that Polymarket was more accurate than polls – were “in alignment with research on the ‘Wisdom of Crowds’ theory, which suggests a large group of people are often accurate in predicting outcomes, even if they are not necessarily experts or closely aligned with the issue at hand”. But more recent analyses suggest that the betting masses are not so wise after all.
A new working paper from scholars at the London Business School and Yale University looked at publicly available trading data from Polymarket. Whereas almost every wagerer’s outcomes were no better than chance, they discovered, the “accuracy comes from a minority of persistently skilled traders, around 3% of accounts”. The crowd “generates most of the volume but little of the information”.
The crowd also furnishes most of the cash but reaps little of it. Analyzing 1.6m Polymarket accounts, or “wallets”, traded since November 2022, the Wall Street Journal found: “Casual traders are bleeding cash while a small number of sophisticated pros – including trading firms with access to vast streams of data – eat their lunch.” What skills do these pros employ? They react quickly to public and financial news, say the London and Yale authors.
Extract — continue reading at the source.
