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Prediction market Polymarket shot to prominence amid the recent U.S. election, attracting monthly trading volume just shy of $2.5 billion in October with over $1.2 billion more already racked up in November. Some users made millions betting on the election—but ultimately, data suggests that most bettors have actually lost money using the platform to date.
Polymarket has allowed users to bet on most events and cultural questions circulating this year, from who will win the U.S. Presidential election to which actor will be the next James Bond. It’s been around for years, but exploded in popularity over the course of 2024 thanks to election hype.
During election season, Polymarket was increasingly quoted by mainstream media outlets as an alternative source to traditional polling. In fact, Polymarket founder and CEO Shayne Coplan believes that the prediction market was more accurate than the polls—after a number of polls tipped Harris to win while Trump was steadily leading on Polymarket in recent weeks.
"On Polymarket it looked like a done deal, and if you were just watching TV, you would think it's neck and neck," says Polymarket CEO @shayne_coplan during his first TV interview on the platform's early call for Trump. "It is an inflection point in news and politics," he says: pic.twitter.com/gkjZOR31w3
— Squawk Box (@SquawkCNBC) November 7, 2024
Despite its growing reputation as a crystal ball, a large majority of Polymarket users have lost money. According to blockchain data collected by multiple Dune dashboards, 86% of accounts have a negative realized profit and loss margin, meaning that a large majority of users have been wrong about their bets and/or sold at a loss.
Fortunately, the average bet size isn’t too large, with $100-$500 being the most common span at nearly 28%, followed by $10-$50 at 26% and $0-$10 at 18% of the share.
Additional data from LayerHub paints a slightly starker balance, pointing to about 88% of users in the red when it comes to realized profits. According to LayerHub's analysis, out of approximately 371,000 unique wallets on the platform, nearly 237,000 of them have posted a loss of $100 or less. That's the largest category by far.
Only 4,004 wallets on Polymarket have realized profits of $1,000 or more, per LayerHub. That's just over 1% of total unique wallets on the platform.
Prediction markets need both high-information (potentially including insiders) and low-information users to create enough liquidity and potential profit to work effectively, expert Thomas Reitz of the University of Iowa told Decrypt in October. "It's a balancing act," he said.
In Polymarket's case, based on the data, it's apparently the "dumb money" that's taking most of the losses so that the "smart money" can amass sizable profits.
It's also worth noting that the platform has seen an influx of users illegitimately using the platform in the attempt to farm a potential future token airdrop. This is done by repeatedly buying and selling positions on Polymarket in a method called “volume farming.” By doing this, many accounts end up losing money, albeit just a couple of bucks.
Polymarket now faces a potential ban in France as the country’s National Gaming Authority (ANJ) opened an investigation on Wednesday. The ANJ said it is currently “examining [Polymarket’s] operation” to assess its compliance with French gambling legislation.
This scrutiny emerged after trader Theo4, identified as French national, profited $47 million across four accounts from $45 million worth of bets. Nearly all of this money was waged on Trump securing a second term in the White House, although Polymarket has disputed any foul play.
Chainalysis said late Wednesday that Theo4’s total profits may actually tally to $78.7 million based on additional accounts that appear to be connected. Whichever multi-million-dollar haul Theo4 ended up with, it’s clear that the whale’s huge win is a rarity among Polymarket users.
Edited by Andrew Hayward