If you are thinking about participating in prediction markets in Canada to earn money, recent research indicates that your chances of success may be slim. Platforms like Polymarket and Kalshi allow users to bet on real-world events by trading contracts related to economic indicators, financial markets, and climate trends in Canada. For instance, current contracts on Polymarket include questions such as “Will there be a Bank of Canada rate hike in 2026?” and “Will any month of 2026 be the hottest on record?”
Unlike traditional gambling, prediction markets do not have a house to bet against. Instead, users compete against each other, and the platforms generate revenue by charging small transaction fees for each bet.
A recent paper authored by researchers from Yale University and London Business School reveals that only three percent of Polymarket accounts, identified as “skilled traders,” consistently make profits and accurate predictions. The study found that a majority of losing traders actually fund the profits earned by skilled traders.
As these platforms gear up to enter the Canadian market through Wealthsimple’s collaboration with Kalshi, experts advise Canadians to understand the competition they are up against.
Roberto Gómez-Cram, co-author of the paper and an assistant professor of finance at the London Business School, emphasized the need for sophistication in trading. He cautioned that without a strategic approach, users may struggle to succeed in these markets.
Average users fund winning minority
The research paper, which has not yet undergone peer review, is based on data from Polymarket, with a sample size encompassing $13.76 billion US in trading volume across 1.72 million accounts.
It highlights that nearly 70 percent of the trading volume originates from less experienced traders. This indicates that the profits in the market are largely funded by the mistakes made by the majority of traders.
Given the absence of a house to bet against, the system relies on a substantial trade volume to operate efficiently. The influx of users investing in contracts leads to increased platform revenues, benefiting skilled traders.
Market operators argue that a substantial number of participants in an event prediction can lead to a collective intelligence known as the “wisdom of the crowd,” resulting in highly accurate outcomes. However, the researchers contend that the accuracy primarily stems from a small group of skilled traders.
