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

CNBC analysis of Polymarket data shows thin liquidity is widespread: ~70% of closed markets from 2021 to end-May had under $10,000 in reported volume, while <10% saw $100,000–$1 million and ~5% (45,000+) had zero reported volume. In markets under $10,000, bots generated over 80% of volume, with experts warning that low volume implies wider spreads and higher volatility for traders. Strategists also found high-volume markets tend to have more reliable probabilities, though some research notes accuracy depends more on who trades than how much trades.

Analysis

The key signal is not that prediction markets are growing; it is that liquidity is extremely concentrated, which caps the category’s monetizable addressable market. A platform with thousands of long-tail markets but little depth in most of them behaves more like an attention product than a durable price-discovery venue, which means revenue should be modeled off a small set of event-driven bursts rather than the headline count of markets.

That concentration also shifts the competitive edge toward whoever can aggregate informed flow into a few liquid contracts and keep spreads tight. In the near term, that favors venues with better distribution, tighter compliance, and repeated catalysts; it does not favor a broad long-tail of speculative markets. Second-order, bot participation helps liquidity in the deepest contracts but likely worsens retail economics in the tail, increasing the chance of user churn and regulatory scrutiny around market quality/disclosure.

The contrarian takeaway is that the market may be overestimating prediction markets as a generalized forecasting layer. If most contracts remain thin, the category is less a substitute for existing information channels and more a niche derivative on news flow; that argues for lower terminal multiples than current growth narratives imply. The main falsifier over the next 1-3 months would be sustained broadening of volume and tighter spreads outside the obvious political/geopolitical headlines; over 6-18 months, a regulatory framework that legitimizes and deepens institutional participation would be the structural upside case.

Key Decisions for Investors

• Do not take a position in EVR on this story; the Evercore research citation is not an earnings catalyst. Treat any EVR move on the headline as noise unless management commentary shows a real market-structure revenue line emerging.
• Set a watch item on CBOE and ICE for any regulatory breakthrough around event contracts over the next 1-3 months. If liquidity broadens beyond a handful of headline markets, a modest long in regulated exchange infrastructure is the cleaner expression than chasing unlisted prediction platforms.
• Avoid paying a premium multiple for any pure-play prediction-market narrative until you see sustained $1M+ weekly volume in a broad set of markets, not just politics/geopolitics. The risk/reward is poor if the long tail remains thin and bot-driven.
• If a public proxy tied to online trading/speculation rallies on this theme, use strength to fade it rather than chase it. The data argues for episodic engagement, not durable platform monetization, which limits upside to valuation multiples.