Dear Reader,
This is Dylan Jovine with Behind the Markets.
Happy Thursday. Today is Thursday, April 30th — the last day of the month.
Today I want to talk about something I don't think I've discussed on this channel before: prediction markets.
What Bloomberg Found
Bloomberg News just published an analysis of Polymarket, which to my understanding is the largest prediction market out there.
The headline finding: a majority of the profits were captured by a small group of automated bots, while everyone else lost $131 million in aggregate.
Around 69% of traders lost money.
The top 1% captured three quarters of all the profits.
What's Actually Happening
What you have here are programmers — people who deeply understand betting — building bots to take advantage of people who don't.
An old friend of mine used to say the stock market is a place where impatient people take money from patient people.
Prediction markets work similarly, but with one very important difference.
In the stock market, if you buy something and it goes down, you lose a percentage of your money.
In a prediction market, you lose everything.
It's a binary outcome — you're either right or you're wrong, and if you're wrong, you're wiped out.
The Market Maker Playbook
Bloomberg's analysis found that since the beginning of 2025, the typical bot averaged 89 trades on each active trading day, compared to just 2.2 trades for human traders.
The University of Toronto, which contributed to the analysis, found that the profits flowed mostly to so-called market makers — people who set the price and take the action at that price, rather than just accepting the odds that are already posted.
I was a market maker on Wall Street.
I owned a market making firm — Lexington Capital Partners — and we made markets in a hundred different securities.
What these bots are doing is exactly the same thing, applied to prediction markets.
They're not coming to the table as bettors.
They're setting the table.
They come into Polymarket, set their own bid, set the floor, and take the action at a price they control.
Meanwhile, the average person walks in and just takes whatever odds are already posted — without any real framework for statistical analysis.
They're rooting for the local team.
The bots are running a sportsbook.
A Warning
If you are playing on prediction markets, understand what you're actually doing.
You are not betting against other people like yourself.
You are betting against professional gamblers who have programmed sophisticated systems to systematically take your money.
The market makers did particularly well on sports wagers, according to the analysis.
It's no coincidence — professional sports handicappers have decades of statistical frameworks built up, and they're simply applying them here at scale.
The Bigger Takeaway
Here's what I find most interesting about all of this.
The same dynamic plays out in the stock market every single day.
Most people don't approach it with any real framework.
They hear a story, they get excited, they bet on a stock the same way they'd bet on a football game.
An old friend of mine pointed out that most people spend more time deciding which car to buy — a $30,000 decision — than they spend thinking about where to put $30,000 in the stock market.
And then they wonder why the top 1% keeps winning.
It tells you something important: it is always better to make the market than to come to the party late.
And frankly, that is exactly the strategy Wall Street elites have been using for years to generate consistent income.
It's called merger arbitrage — and it's how the house makes money.
It’s a little-known “trick” that ANYONE can use to “skim” money off the top of certain takeover deals.
No predicting. No gambling. No binary outcomes.
The deal is already announced. The price is already set. We just collect the spread.
It's the closest thing to being the house that a regular investor can do — and our readers have been using it successfully for years..
Anyway, that's all I have for you today.
Have a wonderful day.
I will see you tomorrow.
“The Buck Stops Here,”
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Written by Dylan Jovine