According to a CNBC analysis, approximately 70% of all completed Polymarket markets had less than $10,000 in reported volume between 2021 and the end of May this year. The analysis relied on Polymarket's Gamma API, which logs the notional amounts traded on each side. Fewer than one in ten markets had volume between $100,000 and $1 million, while over 45,000 markets - close to 5% - recorded zero volume.
"Thin markets by nature imply that small investments can result in large market movements and are typically more volatile," explained Constantin Bürgi, an economics professor at University College Dublin.
In those shallow markets, automated trading bots account for a large share of activity. Joshua Della Vedova, who teaches business at the University of San Diego, identified bots as wallets that made more than 50 trades per day or more than 1,000 total trades. Using that definition, he found that over 80% of volume in markets under $10,000 comes from bots.
Between November 2022 and February 2026, automated trading bots earned about $1.2 million from thin markets and approximately $35.1 million from markets exceeding $10 million in volume. "They are making money across all markets," Della Vedova said.
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Low volume also leads to wider spreads between buying and selling prices. "New traders can also be left vulnerable in low-volume markets because spreads between buying and selling can blow out, making trades more expensive," commented Eric Zitzewitz, an economics professor at Dartmouth College.
"I like higher volume, short term [markets]," stated Logan Sudeith, a 26-year-old former financial risk analyst in Atlanta who began full-time prediction market trading last autumn. "It's more capital efficient."
Opinions are divided on the accuracy of low-volume markets. After studying five years of settled markets on Polymarket and Kalshi, Evercore ISI strategists concluded that high-volume markets offer more dependable probabilities. Just 8% of markets reached $1 million in volume on either platform. "Most quoted probabilities sit in the thinly traded tail - where calibration is weakest," the strategists said.
Other scholars argue that the correlation between market size and accuracy is not straightforward. According to Theis Ingerslev Jensen, a finance professor at Yale University, the key factor is the identity of traders, not the volume of trades. "Thin markets are not automatically inaccurate, but they are less reliable. The key question is whether skilled traders still have enough incentive and ability to trade," Jensen said.
Harry Crane, a statistics professor at Rutgers University, said the prevalence of thin markets on both platforms probably won't change how prediction markets function for the public or Wall Street. "The volumes traded on those markets should be taken into consideration," Crane said, but "the lack of liquidity, on its own, does not discredit a market's signal or make the market economically useless."
With prediction market activity surging rapidly, Crane anticipates that larger markets will keep growing while smaller ones remain shallow. The important thing, he said, is that traders understand the risks involved. "Protect yourself at all times. Each individual entity needs to address them on their own," Crane added.
Polymarket chose not to comment, and Kalshi did not reply to CNBC's inquiries about the findings.
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