Most Prediction Market Users Lose Money to HFT (2 minute read)
A Bloomberg analysis reveals that prediction markets, marketed as accessible side hustles, primarily benefit high-frequency traders while most retail users lose money.
What: Bloomberg analyzed prediction markets—a sector that generated $51B in volume in 2025 and is tracking toward $240B in 2026—and found that profits flow predominantly to HFT firms and sophisticated market makers rather than retail participants.
Why it matters: This mirrors the same profit extraction dynamics seen in traditional equity markets, suggesting that prediction markets aren't the democratized opportunity they're marketed as.
Decoder
- Prediction markets: Platforms where users bet on the outcome of real-world events, from elections to economic indicators
- HFT (High-frequency trading): Automated trading strategies that use powerful computers to execute large numbers of orders at extremely high speeds
- Market makers: Sophisticated traders who provide liquidity by continuously offering to buy and sell, profiting from the spread between bid and ask prices
Original article
Prediction markets, despite being marketed as accessible income opportunities, funnel the majority of profits to high-frequency traders and sophisticated market makers at the expense of retail participants. The sector generated roughly $51B in volume in 2025 and is tracking toward $240B in 2026, but the skewed profit distribution mirrors dynamics seen in traditional equity markets where HFT firms capture outsized returns from retail order flow.