Summary · why it matters
An academic study analyzing $13.76 billion in trading volume on the Polymarket platform found that roughly 27% of dollar profits were captured by just 3% of accounts with consistent skill, accounts that repeatedly drove market prices toward actual outcomes. According to CNBC, this group of accounts profited from reacting quickly to publicly disclosed news, arbitraging unreasonable price gaps in related contracts, and trading against behavioral errors. But as financial institutions increasingly chase these gaps, prices adjust faster and the advantage that once existed shrinks further. Theis Jensen, an economist at Yale University and a co-author of the research, told CNBC that he expects the share of traders seen as having an edge to shrink from 3% to possibly below 1%, leaving only the truly elite, such as hedge funds, able to beat prediction markets. Meanwhile Julie Hoover, an equity research analyst at Bank of America, said skilled retail traders can still hold their advantage in niche markets, because the breadth of contracts allows them to develop highly specialized expertise and become liquidity providers themselves. Large institutions, by contrast, face size constraints in low-liquidity markets, where relatively small orders can move prices enough to erode the institutions' own edge. Separately, researchers from the U.S. Federal Reserve found that macro contracts on the Kalshi platform produced results in line with, or in some cases better than, traditional forecasting benchmarks, with headline Consumer Price Index forecasts outperforming Bloomberg's survey results, while core CPI and unemployment rate forecasts matched those of market data institutions.
Bank of America Corp