Analyst warns prediction markets stack odds against 99% of retail traders

An analyst says prediction markets like Polymarket structurally favor data‑rich insiders, leaving most retail traders exposed to loss, fake volume, and behavioral traps.

A market analyst has issued a warning that up to 99% of retail users on prediction markets may be at risk of losing funds due to structural advantages favoring insiders with access to real-time data, according to a recent analysis.

The investigation by analyst DANNY, published through independent research channels, highlights growing concerns about information asymmetry and artificial volume signals on platforms such as Polymarket as weekly trading volumes reach billions of dollars.

According to the analysis, prediction markets have experienced a fundamental shift in dynamics as they scale. While smaller markets historically allowed informed analysis to guide accurate predictions, the expansion to billion-dollar weekly volumes has enabled traders with early access to news sources and real-time data to dominate outcomes.

Prediction markets are in question

The central issue identified in the report is information asymmetry. Contract outcomes on prediction markets typically depend on news announcements or official updates, allowing individuals with early access to act before the broader market receives the information.

The analysis cited the case of a trader identified as “Alpha Raccoon,” who reportedly earned over $1 million using Google search trend data. The analyst noted that the probability of accurately predicting such outcomes without early data access is low, suggesting that internal information may have been utilized.

Market volume presents an additional challenge for traders, according to the report. High volume levels can create the perception that an outcome is certain, prompting users to follow apparent trends. A 2024 study from Columbia University found that up to 60% of volume-based signals were misleading, driven by strategies designed to manipulate perception rather than reflect genuine market confidence, according to the analyst’s report.

The analysis recommends that retail users exercise caution when participating in prediction markets. Traders are advised to review contract terms carefully, particularly the designated data sources that determine outcomes. Understanding data timing and nature can help avoid entering positions based on false assumptions, according to the report.

The analyst also recommends scrutinizing volume surges, noting that not all trading volume is organic and some may result from coordinated efforts to influence market sentiment. Observing trade timing patterns and wallet movements may provide more reliable insights than aggregate volume figures, the analysis stated.

Behavioral bias represents another risk factor identified in the report. The analyst noted that many traders follow trends without verifying underlying reasoning, recommending that users verify data independently and approach each trade as a strategic interaction with potentially better-informed participants.