In trading markets, the top 5% of pros always win, while everyone else loses money even when the house is literally paying them to play.
March 20, 2026
Original Paper
Skilled Liquidity Provision in Prediction Markets: Evidence from 150 Million Trades
SSRN · 6396698
The Takeaway
Traditional finance theory assumes that 'market makers' are compensated for the risk of providing liquidity, but this study of 150 million trades shows that role choice is irrelevant. It reveals that in modern prediction markets, raw information skill is the only thing that matters, allowing the top tier of traders to extract hundreds of millions of dollars from both the 'takers' and the 'makers' alike.
From the abstract
Classical microstructure theory predicts that market makers earn the spread as compensation for adverse selection, while informed traders consume liquidity. I test these predictions using 150 million trades across more than 200,000 markets on Polymarket, a zero-fee prediction market with observable outcomes and wallet-level identification. Aggregate spread transfer is economically negligible. Decomposing by skill reveals the central finding: skilled traders (top 5% by rolling historical accuracy