67% of profits go to 0.1% accounts: In the forecast market that claims to “help you pay your rent”, ordinary users are continuing to lose money
By Caitlin Ostroff, Katherine Long, and Neil Mehta, WSJ
Compiled by AidiDiaoJP, Foresight News
Original title: Wall Street Journal: Why is almost everyone losing money in predicting the market except for a few “sharks”?
John Pederson, 33, is currently out of work, the former Outback Steakhouse chef is recovering from a car accident and is running out of savings. The prediction market platform Kalshi might be able to solve the problem quickly. He took out a variable interest rate loan and started betting.
At first it went very well. By betting on daily snowfall in Detroit (the city where he lives), Pederson turned about $2,000 into nearly $8,000. He then invested money in sports event transactions, using AI-assisted development strategies, which ultimately reached $4.1 million, according to the Wall Street Journal's review of his account records.
Then he made his boldest bet to date: bet all $4.1 million that a celebrity would say a specific word on TV, and ended up losing everything.
Pedersen isn't the only one to return empty-handed in “anything can be gamed' markets, which include sports, celebrities, news, and more.
Kalshi and its rival Polymarket promote themselves as tools that can change the lives of ordinary people — implying that everyone has a fair chance to make a big profit. “I almost couldn't pay my rent, but with Kalshi's predictions, I earned two years of rent,” a woman said excitedly in a Kalshi ad on TikTok.
But for most users, the reality is completely different.
Instead, according to the Wall Street Journal's analysis of platform data and interviews with traders, ordinary traders are continuing to lose money, while a small group of experienced professional players — including trading companies with massive data resources — are eating up their funds.
The Wall Street Journal found that on Polymarket, 67% of profits go to accounts that account for only 0.1%. That means less than 2000 accounts collectively netted nearly $500 million. The Wall Street Journal analyzed 1.6 million accounts traded on Polymarket since November 2022. The total number of accounts on the platform is at least 2.3 million.
The same goes for Kalshi, where there are far more losers than winners. Spokesman Elizabeth Diana said that according to data from the past month, each profitable user corresponds to 2.9 loss-making users. She said that ratio is likely to change as the platform grows. The company does not disclose comprehensive data on user profits, nor does it disclose the total number of users.
According to data analytics firm The Block, the total trading volume of the two platforms surged to $242 billion in April, compared to just $1.8 billion a year ago.
Proponents say these markets are not gambling, but rather use collective intelligence to accurately predict future events. Research by the Federal Reserve shows that Kalshi is an effective tool for predicting economic trends.
Traders are paying for big data streams provided by third parties to gain an advantage. Computers use data and algorithms to predict price movements and manage risk faster than any human being. Professional players also take advantage of scale to make frequent, strategic transactions — sometimes tens of thousands of transactions a day — and profit from small fluctuations, which requires the concentration and discipline rare in ordinary users.
Former professional poker player and statistics-trained Michael Boss said, “Retail traders don't have any opportunities.” He places 60 trades every minute on Kalshi and modifies offers 30 times per second.
Diana said that many financial markets show a similar phenomenon of wealth concentration, and there are more users who make money on Kalshi than day trading or traditional sports betting. She said Kalshi is no longer advertising “help me pay my rent.”
A Polymarket spokesperson declined to comment on the Wall Street Journal's analysis.
Polymarket has a data partnership with Wall Street Journal publisher Dow Jones, and this analysis uses only publicly available data.
Take Pederson, an unemployed cook who lost everything, for example. He fell into a category full of “bad guys”: referring to the market (betting on whether someone would say a specific word).
Professional traders say they don't touch this type of bet because it's unpredictable, and even multi-million dollar data doesn't provide a reliable advantage.
According to the Wall Street Journal analysis, the actual payment frequency of market bets was far lower than expected. Retail bettors take more risks than they realise, partly due to the “unpopular bias” phenomenon — bettors overestimate low-probability events due to excitement.
Kalshi mentioned that the monthly trading volume of the market far surpassed Polymarket, which has exploded since mid-2025. These bets are popular among the platform's young users — including influencers promoting them in live social media broadcasts and other videos showing off their wins.
John Pederson stands outside a Detroit homeless shelter and has been living here since he lost money in Kalshi's investment. © Emily Rose Bennett for The Wall Street Journal
“someone smarter than you”
For all types of betting, the propaganda of Polymarket and Kalshi is simple — users can monetize what they know and make quick money — the claim has taken the world by storm.
However, the Wall Street Journal analysis found that over 70% of Polymarket users are losing money. A working paper by French and Canadian researchers came to similar conclusions last month. They found that almost all of the profits in the forecasting market go to sophisticated traders, while desperate and retail traders bear the losses.
According to the Wall Street Journal's analysis of Polymarket trading data, the average user lost an average of $1 to $100, while the worst performing 10% lost an average of $4,000 per person.
Some people make emotional decisions — follow their feelings or place bets based on information obtained from open sources.
A person from Connecticut who claimed to have a gambling problem bet on the Super Bowl at Kalshi and lost $2000 in a single day—all in a tense fourth quarter. A 31-year-old in Indiana called the deal “like a drug,” and for the first few months of this year he bet on sporting events almost every day at Kalshi, losing around $5,000.
By contrast, the prediction market is increasingly attracting companies with dozens of employees, spending millions of dollars buying professional sports and financial data, and running trading algorithms. They aim to beat the students, recreational gamblers, and other low-volume traders who make up the majority of the platform's users.
In traditional gambling, the bookmaker sets the odds, receives bets, and pays the winners. There are no “bookmakers” in the prediction market; users trade with each other. The platform only charges transaction fees, which vary depending on factors such as contract price and market type.
In an office in Soho, a college dropout stared at a computer screen and watched the millions of dollars flowing as retail traders bet on the price of Bitcoin.
Samuel Wood-Soloff dropped out of Princeton University this year to receive a $50 million check from Alliance Capital, a crypto startup accelerator backed by prominent investors in Silicon Valley, including crypto entrepreneur Balaji Srinivasan. He took math classes at the University of California at Berkeley in high school and took a year off to trade cryptocurrencies before entering Princeton. Now he and four friends have moved to New York to trade the forecasting market full time and bet on sports, politics, and future cryptocurrency prices.
“Our only competitors are market makers,” he said in an interview. He was referring to other companies like them that continuously offered offers to buy and sell. He declined to disclose the company's profit and loss, but said it has deployed $500,000 to $1 million in Polymarket, Kalshi, and other small prediction markets.
Former professional poker player Boss has earned over $668,000 on Kalshi, mostly from sports betting, which is his track record since he made serious trades about three months ago. In addition to the speed of transactions, he is also extremely strict in pricing his trading offers.
“You'll find the easiest way to make money is sports,” he said. “Sport attracts all 'sick' young men, I think.” He clarified that “morbid” meant gambling addicts.
On Kalshi, he observed that a large number of retail traders simply bet “yes” on what they wanted to happen. “It's completely different from a crypto or stock exchange where people trade securities.”
Jonathan Stoll - Ryan, a college student in Charlottesville, Va., runs a company that trades cryptocurrency prices on Kalshi and is in the top five in terms of trading volume. © Laura Thompson for WSJ
Stall-Ryan's company pays for real-time data from third parties and uses algorithms to execute tens of thousands of transactions every day. © Laura Thompson for WSJ
Another company with around 12 employees (all college students like him), founder Jonathan Stol-Ryan, is one of the top five traders for cryptocurrency price betting on Kalshi. The company spends more than $200,000 a year on real-time data sources, AI-coded agents, and servers, and uses algorithms to execute tens of thousands of real-time transactions every day.
Stoll - Ryan was with members of the fraternity at the University of Virginia and saw them randomly betting on the price of Bitcoin on Kalshi. He said he thought to himself at the time, “That guy is going to lose money.”
Most of these professional traders work as market makers. Kalshi and Polymarket said they would refund some of the market makers' fees, and sometimes even pay them to provide liquidity.
Quantitative trading company Susquehanna International Group became Kalshi's first major institutional market maker in 2024. According to professional traders who monitor Kalshi's order book, the company trades hundreds of millions of dollars through Kalshi every week. The account is private, and there is no way to know the exact profit. Susquehanna declined to comment.
Another quantitative trading company, Jump Trading, is active on both Polymarket and Kalshi. In mid-April, Jim Esposito, president of Citadel Securities, said at the Semafor event that the company is “closely monitoring” the development of the forecasting market. Some traders who buy high-risk options contracts are now flocking to the prediction market.
Susquehanna co-founder Jeff Yas said in a 2020 sports betting podcast: “All sports betting, all poker, all options trading is essentially gambling with people who are dumber than you.” In the same podcast, he described his role in supporting predicting market developments as a “mission from God.”
On the one hand, he believes Americans should be able to legally bet on sports even if banned in some states; on the other hand, “I expect to make a lot of money.”
Stoll - Ryan is on the University of Virginia campus. His company employs about a dozen college students. © Laura Thompson for WSJ
Looking for easy money
The platform has designed a contract that allows users to ask “yes/no” questions about future events. Contracts are usually designed to pay $1 when correct and return to zero if wrong. The contract price reflects the trader's assessment of the probability of an event occurring. For example, if the contract transaction price for an event is 41 cents, the prediction market assumes that the event has a 41% chance of happening. If you win, a contract bought at 41 cents will pay $1; if you make a mistake, you lose your principal.
The contract price will continue to change according to the market power of the buyer and seller before settlement. Traders profit from small price fluctuations, just like Wall Street traders.
Many naive forecasting market participants are repeating the mistakes of speculators in financial markets looking for easy money. Decades of research have shown that day traders rarely make money. In recent years, many retail traders have lost their money on highly volatile meme stocks, spurred by social media.
Kalshi and Polymarket's US operations (recently launched to a small number of early users) are regulated by the Commodity Futures Trading Commission (CFTC) and said their platforms trade similarly to other regulated financial markets. The vast majority of Polymarket's activity takes place on its offshore platform, which is technically inaccessible to Americans, but is easy to bypass with a VPN.
Critics say these markets are prone to problems such as insider trading. Recent examples include suspected insider deals on US military operations in Venezuela, Google announcements, and congressional campaigns.
CFTC Chairman Michael Selig defended predicting markets and clarified federal agencies' jurisdiction over these platforms. The agency has cracked down on suspected insider trading and has hinted that government enforcement will be strengthened.
Polymarket said it has cooperated with the Department of Justice to crack down on insider trading. Kalshi has banned insider trading on the platform and has penalized several illegal traders in recent months.
Former Kalshi employee Adi Rajaprabakaran referred to retail traders as “fish” on Substack last year (a gambler's joke, referring to people who lose money easily). In the interview, he said that although he still generally believes this is true, he also believes that the presence of unaware traders in the prediction market will strongly encourage more sophisticated traders to enter, thus generating more accurate predictions.
“Everyone sees themselves as the more informed side when placing bets,” he said. “The more right people make more money in the long run. No one was forced to do that.”
$4.1 million bet
Prior to getting involved in the mentions market, Pedersen had a pretty good experience with Kalshi. “I have a broad focus on finance,” he said. “I'm always looking for ways to sharpen my acuity, if you like to say that.”
Mention the trading volume of the market
When it comes to market betting, there's only one central question: do public figures say a word? Will Kalshi users bet more than $28 million on terms such as “cartel,” “Somali,” or “hockey” during Trump's State of the Union address this year. According to The Block data, Kalshi users spent a total of nearly $181 million on the mentions market in February.
The Wall Street Journal's analysis of Kalshi's data shows that the actual payout rate mentioned in the market is far below the level expected by bettors based on the listed odds.
The Wall Street Journal analyzed more than 35,000 completed mentioned markets on Kalshi and found that, on average, “Yes” transactions priced at a 50% win rate actually had a payout rate of about 40%. Since the contract price is supposed to match the probability, these bettors are actually paying more.
The analysis found that these market transactions often showed long shot deviations and frequent losses. On average, traders who place a “yes” bet when they see the first price mentioned in the market (this is a common pattern among retail traders) lose 11% of the amount they bet. According to University of Nevada Las Vegas research, this return is worse than most Las Vegas slot machines.
Kalshi spokesperson Diana acknowledged that the market was biased in expectations, but said that the reference to the market did not represent the overall pricing of the platform, nor was it an appropriate target for such pricing analysis. She added that Kalshi's analysis showed that the pricing of the mentioned market was more accurate within four hours prior to the incident.
Kalshi encouraged to mention that market traders livestreamed their trades during the event. The two live streamers said this was to increase market participation. Bank of America analysts wrote in an April market forecast report: “Mentions of live market broadcasts on social media often became popular and boosted Kalshi's brand awareness.”
In January of this year, Pederson bet all the $4.1 million he earned on rapper A$AP Rocky would say the word “rapper” on “The Jimmy Fallon Tonight Show” — the star recently played a rapper in a movie. He would have had a chance to win over $16.8 million.
However, the version broadcast by NBC cut out that segment. According to Kalshi's market rules, only what is said in the televised version counts.
In a video posted by himself, Pederson said that this rule section on the platform's website was not obvious; he didn't see it. (Kalshi later updated the interface to make the market rules more visible.)
Pederson lost all of his money and had few other resources to rely on. He currently lives at a homeless shelter in downtown Detroit, but he said he recently received a job selling mortgages.
He said that when he gets back on his feet, his goal is to enter the financial industry to support his music career. Will he return to predictive market trading? “Maybe,” he said. “I'd rather spend my time in a more regulated market.”
Twitter:https://twitter.com/BitpushNewsCN
Compare the TG exchange group:https://t.me/BitPushCommunity
Compare TG subscriptions:https://t.me/bitpush
