Who Wins and Who Loses In Prediction Markets? Evidence from Polymarket
Pat Akey (ESSEC Business School), et al.
April 2026
We study pricing efficiency in decentralized prediction markets by comparing marketimplied probabilities from Polymarket with benchmarks derived from option-implied riskneutral distributions extracted from the derivatives market. We study Bitcoin and Ethereum prediction bets and find that, although Polymarket prices broadly track option-implied benchmarks, they show systematic price differences driven by behavioral factors and market frictions. Price differences are most pronounced in tail events, during periods of high volatility, and in response to major macroeconomic shocks, and they reflect the influence of sentiment, attention, and blockchain-specific risks. These results reveal both efficiency and behavioral distortions in prediction markets.