Prediction markets tighten edge for traders as Wall Street adoption grows

Prediction-market platforms are attracting deeper institutional participation, raising liquidity and intensifying competition—but this professionalization is making it increasingly difficult for traders to sustain consistent profits. A Yale-led study analyzing $13.76 billion in Polymarket trades found that only 3% of accounts generated persistent, profitable strategies, earning roughly 27% of dollar profits. These skilled traders exploited faster reactions to public news, arbitrage between mispriced contracts, and behavioral errors, but as more institutions chase the same opportunities, pricing becomes more efficient and edges shrink. Analysts warn that strategies reliant on wide spreads or straightforward arbitrage will struggle as markets tighten.