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Prediction market apps like Polymarket and Kalshi have exploded in popularity the past two years, with millions of Americans now betting on everything from who will play in the U.S. Open to when Taylor Swift will get pregnant.

But despite all the buzz and excitement, it's tough to reliably make money from them. Recent data show the odds are heavily stacked against most regular traders.

How the bets work

Prediction markets were relatively niche until recently, when they took off ahead of the 2024 U.S. presidential election. Since then, trading volume has surged: Kalshi, for instance, has seen monthly volume quadruple to over $40 billion just in the past six months, according to DeFi Rate.

Today, sports are by far the most common topic bet on (particularly on Kalshi), followed by politics and crypto. But you can find bets on virtually anything, including who will top the music charts, what public figures will say in interviews, or what the Federal Reserve's next interest rate move will be. In fact, at any one time, there can be over 100,000 active markets across Polymarket and Kalshi, CNBC recently reported.

At their core, prediction markets are simple. Binary contracts are linked to events (e.g. Taylor Swift will get pregnant by September) that either happen or don't.

Shares trade between $0 and $1 based on collective probability, with the understanding that contracts pay $1 if the prediction is correct or nothing if it's not. For example, if you buy a “yes” share on “will it rain tomorrow?” for 80 cents, the market is assigning an 80% chance that it will rain tomorrow. If it does rain, the contract pays out $1, netting you a 20 cents profit. If it stays dry, the contract expires worth nothing, and you lose your 80 cents.

While many fans are drawn to the thrill of prediction markets, 41% of users — often young men — say their main goal is to make money.

But the reality is, that's harder than it sounds. Looking at a sample of almost 12,000 Polymarket accounts over a six-week period this spring, the Pew Research Center found traders spent an average of $600 to incur a net loss of $2. Fifty-eight percent neither gained nor lost more than $100, and only 7% made more than $1,000.

Battle of the bots

Most people who make money on prediction markets trade big sums very quickly using algorithm-driven bots, according to research by Joshua Della Vedova, associate professor of finance at the University of San Diego. His analysis of Polymarket trades showed retail traders just aren't fast enough to effectively compete with bot makers trading more than 50 times a day.

“Even if you're right more than 50% of the time, you tend to lose money,” Della Vedova said.

Della Vedova's findings corroborate what Bloomberg News found in a separate April study of Polymarket transactions. Data from millions of accounts showed that trading and profits are dominated by a tiny slice of highly active accounts — what looked to be automated bots, Bloomberg reported. And about twice as many users lost at least $1,000 than made at least $1,000, the outlet found.

Everyday Kalshi traders aren't exactly better off: They lost more than $583 million between the platform's launch in July 2021 and May 2026, according to an analysis from the Roosevelt Institute.

Regulatory debate

The challenges don't end with algorithms. Prediction markets are ripe for insider trading — a Google employee was recently accused of making over $1.2 million off confidential data — and there are concerns that platforms inflate trading volumes.

Perhaps the biggest controversy is how they're regulated. Kalshi and Polymarket contracts are considered financial securities, allowing the apps to operate even in states where sports gambling is prohibited — and letting them cater to traders as young as 18 rather than 21. Critics and some research suggest they're just as addictive.

So what?

As tools for taking the public's pulse, prediction markets can be remarkably telling — sometimes foreshadowing events better than political polls or media outlets. And it's easy to understand their appeal — especially if you like taking risks, get a rush from a live scoreboard, or want skin in the game.

But that game is also “zero-sum,” so there's no middle ground: Unlike stocks or bonds, you've got one shot to profit from being right with prediction markets. And you're not taking an ownership stake in an underlying asset or getting long-term investment exposure.

The safest approach to prediction market trading may be to treat your bets like concert tickets, dinners out, or any other entertainment expense. Otherwise, traditional investments, even with their own set of risks, may be more dependable for building long-term wealth.

The U.S. stock market, for instance, has generally trended up over time, with the S&P 500 Index posting an average annualized return of 13.4% over the past decade.

Related Reading

Campaign Staffers Tell NPR They Make 'Thousands' Betting on Their Candidates (NPR)

The New Prediction-Driven Gambling Boom (American Psychological Association)

How Do Prediction Markets Work? (SoFi)

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