Interested in profiting from prediction markets as they expand into Canada? Recent studies indicate that the odds may not be in your favor.
Prediction markets such as Polymarket and Kalshi enable users to bet on the likelihood of real-world events by trading contracts. In Canada, these markets will focus on events related to economic indicators, financial markets, and climate patterns. For instance, current contracts on Polymarket include questions like “Will there be a Bank of Canada rate hike in 2026?” and “Will any month in 2026 be the hottest on record?”
Unlike traditional gambling setups, prediction markets do not involve a house to bet against. Instead, users compete against each other, and the markets generate revenue through small transaction fees on each bet.
A recent paper authored by researchers from Yale University and London Business School reveals that only about three percent of Polymarket accounts, identified as “skilled traders,” consistently made profits and accurate predictions. The study suggests that a larger percentage of losing traders essentially funded the successful traders.
With these markets gearing up to enter Canada through Wealthsimple’s collaboration with Kalshi, experts emphasize the importance for Canadians to understand their competition.
“You need to be sophisticated,” stated Roberto Gómez-Cram, co-author of the study and an assistant finance professor at the London Business School, in an interview with CBC News.
“If you are just clicking there, you will be eaten alive.”
Toronto-based online investment giant Wealthsimple is bringing prediction market betting to Canada through its new app, Wealthsimple Predict. Prediction markets allow users to wager on the outcomes of real-world events, but critics warn they’re just another dangerous form of gambling.
Majority funding skilled minority
The study, not yet peer-reviewed, analyzed data from Polymarket, including $13.76 billion US in trading volume across 1.72 million accounts.
It indicates that nearly 70 percent of the trading volume originates from less experienced traders. Consequently, successful traders largely benefit from the mistakes of the majority.
Given the absence of a house to bet against, the system relies on a substantial trade volume to operate effectively. The more users participate in contract positions, the more capital flows into the platform, resulting in increased earnings for skilled traders.
Market operators argue that a collective prediction, known as the “wisdom of the crowd,” leads to highly accurate outcomes when enough people bet on an event. However, the researchers suggest that true accuracy stems from the small group of skilled traders.