Most prediction market contracts have low volume, leaving users exposed to volatility and bots

• Over 80% of volume in markets under $10,000 comes from bots, which earned roughly $1.2 million in shallow markets compared to $35.1 million in markets exceeding $10 million in volume
• Only 8% of markets on Polymarket and Kalshi reached $1 million in volume, with Morgan Stanley strategists noting that 'most quoted probabilities sit in the thinly traded tail - where calibration is weakest'
• Week-long markets with high-profile topics (Iran war, Trump, Musk) had the highest number of contracts exceeding $1 million, as traders prefer short-term markets close to resolution with many participants

Market Summary: Prediction Market Liquidity Analysis

Key Findings

A CNBC analysis reveals significant liquidity challenges across prediction market platforms Polymarket and Kalshi. Approximately 70% of closed markets on Polymarket saw under $10,000 in reported volume from 2021 through May, with nearly 5% (45,000+ markets) recording zero volume. Fewer than 10% of markets attracted between $100,000-$1 million in volume.

Market Implications

Trader Vulnerabilities:

• Low-volume markets experience heightened volatility, where small investments trigger large price movements
• Wide bid-ask spreads make trading more expensive, particularly impacting retail participants
• Bots dominate thin markets, controlling over 80% of volume in sub-$10,000 markets

Bot Performance:

Bots generated approximately $1.2 million in shallow markets versus $35.1 million in markets exceeding $10 million volume (November 2022-February 2026), demonstrating profitability across all market sizes while retail traders faced consistent losses.

Market Preferences:

Traders favor short-term markets (up to one week) focused on high-profile topics—U.S. President Trump, Elon Musk, Iran conflict—which attracted the highest volume. These shorter-duration contracts offer greater capital efficiency.

Accuracy Concerns

Research shows only 8% of markets on both platforms reached $1 million volume, with Goldman Sachs strategists noting "calibration is weakest" in thinly-traded markets. However, Yale researchers found accuracy depends more on trader skill than volume levels.

Outlook

Experts expect liquidity bifurcation to continue—high-volume markets will grow while shallow markets remain thin. The analysis underscores critical risk awareness requirements for participants navigating these emerging financial instruments.