Kalshi and Polymarket.
Gabby Jones | Bloomberg | Martin Lelievre | Getty Pictures
Quantity has exploded on prediction market platform Polymarket since its launch, with notable surges in the course of the 2024 election and final fall. But the vast majority of closed particular person markets on the positioning by no means surpassed $10,000 in reported quantity.
A CNBC evaluation discovered that about 70% of all closed markets on Polymarket noticed underneath $10,000 in reported quantity from 2021 to the tip of Might this yr, in response to Polymarket’s Gamma API. The Gamma API information notional quantity on each side of the commerce.
Fewer than 10% of all closed markets attracted between $100,000 and $1 million in reported quantity.
Over 45,000 markets, or practically 5% of all closed markets, had no reported quantity by any means.
Kalshi, Polymarket’s competitor, additionally had numerous shallow markets, in response to an evaluation achieved on the on-chain platform Dune. In contrast to Polymarket’s Gamma API, Kalshi’s notional quantity on Dune solely counts one facet of the commerce.
Low quantity markets should not very best for prediction market merchants. For starters, costs can fluctuate broadly, stated Constantin Bürgi, a professor of economics at College School Dublin.
“Skinny markets by nature suggest that small investments can lead to massive market actions and are usually extra unstable,” Bürgi instructed CNBC.
New merchants will also be left susceptible in low-volume markets as a result of spreads between shopping for and promoting can blow out, making trades dearer, stated Eric Zitzewitz, professor of economics at Dartmouth School.
Much less interesting
Skinny markets are additionally much less interesting to seasoned merchants.
“I like larger quantity, brief time period [markets],” stated 26-year-old Logan Sudeith, a former monetary threat analyst based mostly in Atlanta, who began buying and selling full-time on prediction markets final fall. “It is extra capital environment friendly.”
Markets lasting as much as per week had the very best variety of contracts with at the very least $1 million in reported quantity on Polymarket. These week-long markets had contracts associated to the conflict on Iran, U.S. President Donald Trump or Elon Musk.
Brief-term markets could be a candy spot for merchants, as are these with a big of variety of members.
“Individuals prefer to commerce issues near being resolved,” Zitzewitz, the Dartmouth educational stated final month, noting that members are “extra more likely to commerce in a market [when] a lot of persons are there.”
Bots dominate shallow markets
Inside Polymarket, over 80% of quantity in markets underneath $10,000 comes from bots, stated Joshua Della Vedova, a enterprise professor on the College of San Diego.
Della Vedova recognized wallets, or digital accounts, as bots in the event that they made greater than 50 trades per day or greater than 1,000 whole trades.
Utilizing this definition, Della Vedova discovered bots made roughly $1.2 million in shallow markets and roughly $35.1 million in markets that had extra $10 million in quantity from November 2022 to February 2026.
“They’re making a living throughout all markets,” Della Vedova stated, utilizing Polymarket’s on-chain information. That contrasts with retail merchants, who’ve confronted losses in shallow or heavy markets.
Whereas bots dominate the amount in shallow markets, they do not push costs away from honest worth since there’s a threat of excessive losses. Bots on Polymarket additionally favor heavier markets over thinly traded ones as a result of the last word objective is incomes a revenue, the UC San Diego professor added.
“[Bots] earn cash per transaction, and subsequently they like to commerce in these bigger markets, however they’ll commerce throughout the entire spectrum,” Della Vedova stated.
Accuracy on skinny markets
Consultants are combined on whether or not skinny markets are additionally correct.
Evercore ISI strategists discovered high-volume markets have extra dependable chances than skinny markets after analyzing 5 years of accomplished markets on each Polymarket and Kalshi.
After discovering solely 8% of markets touched $1 million in quantity on each platforms, the strategists stated “most quoted chances sit within the thinly traded tail – the place calibration is weakest.”
Different researchers stated the connection between market dimension and accuracy is non-linear. For Theis Ingerslev Jensen, a Yale College professor of finance, accuracy is pushed by who’s buying and selling reasonably than how a lot buying and selling is going on on a given market.
Jensen and researchers on the London Enterprise Faculty, discovered expert or knowledgeable merchants drove the vast majority of the accuracy on Polymarket.
“Skinny markets should not mechanically inaccurate, however they’re much less dependable,” Jensen instructed CNBC. “The important thing query is whether or not expert merchants nonetheless have sufficient incentive and talent to commerce.”
Affect stays
The abundance of shallow markets on each platforms are unlikely to have an effect on how prediction markets function for most of the people and Wall Avenue, stated Harry Crane, professor of statistics at Rutgers College.
“The volumes traded on these markets must be considered,” Crane stated, however “the shortage of liquidity, by itself, doesn’t discredit a market’s sign or make the market economically ineffective.”
Polymarket declined to remark and Kalshi didn’t reply to requests on CNBC’s findings.
As prediction market quantity continues to develop at a breakneck tempo, Crane expects greater markets will develop whereas low-volume markets keep shallow. What issues is that merchants are conscious of the dangers.
“Defend your self always,” Crane added. “Every particular person entity wants to deal with them on their very own.”
Methodology:
CNBC pulled all closed market information by way of Polymarket’s Gamma API from 2021 to the tip of Might 2026. The Gamma API counts notional quantity on each side of a commerce. For that reason, CNBC wrote “reported” quantity coming from the Gamma API.
This evaluation on Polymarket was reviewed by Joshua Della Vedova, a enterprise professor on the College of San Diego. He cross-checked our findings with an unbiased, on-chain commerce dataset of 222 million resolved Polymarket trades. Our findings aligned with Della Vedova’s.
