Warren Buffett recently remarked that the stock market is increasingly resembling “a church with a casino attached.” While hyperbolic, the analogy feels increasingly relevant as speculative activity expands beyond traditional markets into platforms such as Polymarket, where participants wager on everything from niche weather outcomes and inflation releases to geopolitical events.
A Market Growing at Speed
Prediction markets have moved from niche curiosity to meaningful financial activity. Industry volumes reached roughly $44 billion in 2025, with Polymarket accounting for roughly half of that total.
Monthly volumes have accelerated sharply too, from around $5 billion in late 2024 to approximately $24 billion by March 2026, while weekly trading volumes have reached record highs of $3.7 billion.
What began as election betting has broadened into macroeconomic events, geopolitics, and even central bank decisions, blurring the line between hedging, forecasting, and speculation.
Who Is Actually Making Money?
Despite the narrative of the “wisdom of crowds,” the distribution of returns is highly skewed.
Recent reporting from The Wall Street Journal highlights that:
- 67% of profits accrue to just 0.1% of accounts.
- The majority of users lose money, with significantly more losing accounts than profitable ones.
Broader data reinforces this pattern:
- More than 70% of users are unprofitable.
- Only a small minority generate meaningful gains, with extreme concentration among top traders.
In effect, prediction markets resemble many other speculative arenas: a small group of sophisticated participants extract value from a much larger pool of less experienced users.
Institutionalisation and the Rise of Professional Trading
As volumes have grown, institutional participation has followed.
While the identities of most professional participants remain opaque, the broader pattern is familiar: algorithmic and data-driven traders tend to thrive in markets characterised by fragmented pricing, behavioural biases, and information asymmetries – the very conditions prediction markets exhibit. The Wall Street Journal notes that professional traders use quantitative models, data advantages, and arbitrage strategies across markets to systematically outperform retail participants. These dynamics are already well understood in equities, options, and other financial markets.
Prediction markets are increasingly exhibiting the same characteristics.
Information Advantage and the Iran Conflict
Perhaps the most controversial development is the intersection of prediction markets with geopolitics.
During the 2026 US/Iran conflict, several accounts reportedly generated more than $600,000 by correctly positioning for a U.S.–Iran ceasefire shortly before public announcements were made. Academic researchers have identified more than $140 million in potentially anomalous trading profits associated with events where informed trading may have occurred.
Whether these cases ultimately reflect superior analysis, information leakage or coincidence, they expose a fundamental challenge: when markets allow participants to trade on real-world political and military outcomes, the value of information becomes extraordinarily high. This raises not only regulatory questions, but ethical ones as well.
Behavioural Shift: From Investing to Gambling
For most retail participants, however, the more important issue is behavioural.
While prediction markets are often presented as forecasting tools or even a new asset class, the behaviour they encourage frequently resembles gambling more than investing:
- Users gravitate toward low-probability, high-payout outcomes.
- Social media and narrative-driven trades dominate decision-making.
- Time horizons are measured in days or weeks rather than years.
This aligns with well-documented behavioural biases, particularly overconfidence and “lottery preference,” but now embedded within a platform that looks and feels like a financial market.
The experience increasingly resembles gambling dressed in the language of investing.
The Gamification Effect
Prediction markets are also part of a broader trend toward the gamification of finance. Much like sports betting apps and some retail trading platforms, they are designed to encourage engagement through real-time updates, constantly changing odds, leaderboards, social sharing, and immediate feedback on decisions.
Behavioural research shows that frequent feedback and variable rewards can increase participation and risk-taking. The result is that users often become focused on the excitement of being right rather than the economics of expected returns. Success is measured by predicting the next event rather than building long-term wealth.
This distinction matters. Investing is fundamentally about allocating capital to productive assets that generate cash flows over time. Gamified platforms, by contrast, reward activity, prediction, and short-term outcomes. The more engaging the experience becomes, the easier it is for participants to confuse entertainment with investment.
Implications for Investors
That does not mean prediction markets are without value. Market-implied probabilities can provide useful information about sentiment and expectations. They may become an increasingly important source of real-time forecasting data.
But they are unlikely to change one of the most enduring lessons in finance: sustainable wealth creation rarely comes from correctly predicting short-term events.
For investors, the growth of prediction markets serves as a useful reminder of several enduring investment principles.
- First, skill remains scarce and highly concentrated. The existence of a market does not mean participants have an edge within it.
- Second, market structure matters. When success depends on speed, information and sophisticated execution, retail participants are typically at a disadvantage.
- Third, speculation should not be confused with investing. Forecasting the outcome of tomorrow's headline is fundamentally different from owning productive assets that compound over decades.
Prediction markets will almost certainly continue to grow. They may become a valuable forecasting tool and a permanent feature of the financial landscape. But Buffett's observation remains relevant. The more financial markets resemble casinos, the more important it becomes for investors to remember that long-term wealth is rarely built at the gaming tables. It is built through patience, discipline, and the relentless power of compounding.