For Financial Advisers Only

Polymarket is a decentralised prediction market platform where users buy and sell outcome-linked contracts on real-world events, including elections, economic data, sports results, geopolitical developments, and just about anything else that can be resolved. It runs on blockchain infrastructure, settles in USDC (a dollar-pegged stablecoin), operates outside traditional financial markets, and is open to users in many regions. Each market resolves to either $1 (if the event happens) or $0 (if it doesn’t), so every position is, in essence, a binary bet on a stated outcome.^[1]

It has gone from niche to mainstream conversation because it taps into a very modern temptation: “If I’m right about the news, why shouldn’t I make money from it?” Add a friendlier US regulatory environment under the second Trump administration^[2], a $2 billion investment from Intercontinental Exchange (ICE), the owner of the New York Stock Exchange, at a roughly $9 billion post-money valuation,^[3] and prediction markets have started to look less like an unorthodox internet casino and more like financial infrastructure. The company is reportedly already in talks to raise again at up to $15 billion.^[4]

But while the user experience may look adjacent to investing, the economics and behaviour look far more like gambling. Let’s look into why that is.

The mechanics

Most Polymarket markets are simple binary contracts. You buy YES or NO shares at a price between $0 and $1. If the event happens, YES pays $1 and NO pays $0, and if it doesn’t, the reverse. Winning tokens can be redeemed for $1 each once the market resolves.

Here’s the investing-like illusion: if YES trades at $0.62, traders interpret it as a 62% probability. This is exactly how Polymarket markets itself (pardon the pun) as a real-time probability and sentiment engine.

The risk lies in resolution

What counts as “the event happened” is decided by Polymarket’s resolution process, and this is where things look less clean than the price action would suggest. Polymarket relies on Universal Market Access (UMA), a decentralised protocol, and its Optimistic Oracle, meaning anyone can propose an outcome, which is assumed correct unless another party disputes it within a set challenge window by posting a bond, typically $750 USDC.^[5]

On paper, the process is reasonably robust. The dispute mechanism is structured, and most markets settle without controversy. But real-world events are messy. Wording disputes are common, and ‘what should happen’ can diverge from ‘what the rules say happened’. That’s a tolerable feature if one is trading USDC for sport, but a much bigger problem if anyone is treating the resolution as financial truth.

Why Polymarket behaves like gambling, not investing

Timeline’s investment philosophy rests on owning productive assets such as equities and bonds, compounding returns over time, holding diversified risk premia, and accepting short-term volatility for a positive expected return over long horizons, though not guaranteed. Polymarket sits across the table from each of those principles.

Let’s start with the fact that it is a zero-sum venue, meaning your profit is, quite literally, someone else’s loss (ring a bell yet?). Once spreads, slippage, the timing disadvantage that retail traders face against faster or better-informed counterparts, and the operational risk of disputed resolutions are accounted for, it shifts from zero-sum to negative-sum for users as a group. The platform doesn’t need an obvious casino-style fee to do this, as the designed friction already does.

In practice, that means making money consistently on Polymarket is a structurally uphill battle for the average participant.

The maths behind it

If market prices are roughly efficient, the fair expected value of a YES token at price p is about p, since it pays $1 with probability p. Before friction, your expected return is roughly zero. After friction, it’s negative.

The empirical evidence backs this up. A study reviewing 588 million Polymarket trades from 2022 to 2026 found that the top 1% of users capture 76.5% of all trading gains. The most profitable accounts tend to earn their returns by providing liquidity through limit orders that resolve in their favour, while everyone else takes the other side through market orders, though the authors are careful to note that this edge may reflect sample selection as much as genuine skill, and that insider trading is unlikely to explain the biggest winners. Either way, a small, sophisticated minority captures the gains, and the majority funds them.^[6]

Put another way, prediction-market accuracy, to whatever extent it exists, reflects the wisdom of an informed minority, not the wisdom of the crowd. That structure is closer to a thinly regulated derivatives game than a savings vehicle, and is not too dissimilar from your typical sports betting platform.

Store of value? Sentiment indicator? Neither, quite.

A store of value preserves purchasing power across time; think cash-like stability or scarce, productive assets. Polymarket positions are binary claims with expiry dates. They are effectively short-duration bets, full stop. So we cannot reliably give them the ‘store of value’ tag.

‘Sentiment indicator’ is the more interesting and possibly more reasonable argument, and it’s the one ICE is buying. The thinking goes that prices can aggregate dispersed beliefs in real time, sometimes faster than polls or pundits, and ICE is now building the institutional plumbing to distribute Polymarket’s data alongside traditional financial signals.

There is an element of truth here, but the signal is noisier than its supporters might suggest. A Vanderbilt University study by Joshua Clinton and TzuFeng Huang analysed more than 2,500 political prediction markets across the final five weeks of the 2024 US presidential election, with $2.4 billion in transaction volume. Of the three major platforms, PredictIt resolved 93% of markets accurately, Kalshi 78%, and Polymarket, the largest exchange, only 67%. Even more telling, prices for identical contracts diverged across exchanges, daily price changes were weakly correlated, or negatively autocorrelated, and arbitrage opportunities peaked in the final two weeks before the election.^[7]

Mutually exclusive outcomes, for example, the probability of a Democratic win plus the probability of a Republican win in the same race, sometimes sum to more than 100%, which is the kind of pricing error that doesn’t survive long in a properly functioning market. The researchers’ conclusion was that trading was driven by within-market pricing dynamics rather than by traders responding to new political information. In simpler terms, traders were reacting to each other, not the world.

In our view, Polymarket is at best a noisy sentiment indicator with a tendency to amplify herd behaviour rather than aggregate informed views. It might still be useful as one lens among many. It is not a substitute for the analysis; it is sometimes presented as replacing.

The manipulation problem is live

Polymarket also has an active manipulation problem, and it is not the kind that can be chalked up to growing pains. In late 2024, a single French trader placed roughly $45 million on Trump to win, which temporarily moved the platform’s implied odds.^[8] In March 2026, Polymarket published its first formal Market Integrity Rules to crack down on insider trading, spoofing, wash trading, and front-running, after a string of incidents drew regulatory scrutiny.^[9] In April, the US Department of Justice charged a Special Forces soldier with using classified information to bet on the timing of a Venezuelan operation, turning $33,000 into roughly $410,000 in winnings.^[10] Federal prosecutors are now actively exploring how insider-trading and anti-fraud laws apply to prediction-market bets.^[11]

These aren’t isolated edge cases. Each platform set a record for monthly volume in February 2026, with Kalshi processing roughly $9.8 billion and Polymarket processing roughly $7 billion,^[12] which gives both more reason to police their venues and more opportunity for abuse. Both platforms have started tightening up with new rules, surveillance partnerships, and on-chain analytics, but the deeper issue is structural. A market built on pseudonymous, cross-border capital with prices visible to the entire world is simply harder to police than a regulated exchange, and the rulebook is still being written.

Timeline’s view

First of all, we can breathe a sigh of relief that Polymarket isn’t available in the UK as of yet, so that temptation doesn’t exist for most retail customers. But if it were to be, for building long-term wealth, Polymarket is a distraction at best and a wealth leak at worst. Five reasons summarise our position:

• There is no compounding engine, no cash flows, and no productive asset behind the contracts.
• The structure is zero-sum, and negative-sum after costs and friction.
• Outcomes reward overconfidence, narrative addiction, and dopamine trading.
• Insider trading incentives are real, and a public blockchain does not fix the problem. Rather, it makes surveillance harder.
• Disputes, rule ambiguity, and shifting legal boundaries create unique settlement and regulatory risks.

Polymarket, or any prediction market for that matter, might be interesting as a sentiment dashboard, especially as ICE’s institutional distribution makes the data easier to consume. But treating it as investing is like calling roulette a probability-based cash flow strategy. Regulation, settlement infrastructure, and institutional adoption may all improve in the year ahead, but for now, it is probably better to stick to tried and tested investment vehicles.

Important: This blog is prepared exclusively for use by financial advisers; retail distribution is at the adviser's sole risk and discretion. It does not constitute advice, an offer or a solicitation to invest. Every client’s financial circumstances, objectives, and income needs in retirement are different. A strategy that is appropriate for one investor may not be suitable for another, and any approach should be reviewed regularly in light of changing personal needs and market conditions.

Compiled from sources believed to be reliable. Any views, opinions or estimates expressed, including any forecasts or forward -looking statements, constitute the author’s judgment at the time of writing, are not guaranteed and are subject to change without notice. None of Timeline, its directors, officers or employees accepts liability for any loss arising from the use hereof or reliance hereon or for any act or omission by any such person, or makes any representations as to its accuracy and completeness.

References

^[1] Polymarket. Polymarket 101. https://docs.polymarket.com/polymarket-101

^[2] CoinDesk. U.S. CFTC Gives Go-Ahead for Polymarket’s New Exchange, QCX, September 2025. https://www.coindesk.com/policy/2025/09/03/u-s-cftc-gives-go-ahead-for-polymarket-s-new-exchange-qcx

^[3] Intercontinental Exchange. ICE Announces Strategic Investment in Polymarket, October 2025. https://ir.theice.com/press/news-details/2025/ICE-Announces-Strategic-Investment-in-Polymarket/default.aspx

^[4] PYMNTS. Polymarket Targets $15 Billion Valuation in New Funding Round, April 2026. https://www.pymnts.com/news/investment-tracker/2026/polymarket-targets-15-billion-valuation-in-new-funding-round/

^[5] Polymarket. Concepts: Resolution. https://docs.polymarket.com/concepts/resolution

^[6] Akey, P., Grégoire, V., Harvie, N., and Martineau, C. Who Wins and Who Loses In Prediction Markets? Evidence from Polymarket, 2026. SSRN. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=6443103

^[7] DL News. Are Polymarket and Kalshi as reliable as they say? Not quite, study warns, December 2025. https://www.dlnews.com/articles/markets/polymarket-kalshi-prediction-markets-not-so-reliable-says-study/

^[8] Bloomberg. Election-Betting Site Polymarket Says Trump Whale Identified as French Trader, October 2024. https://www.bloomberg.com/news/articles/2024-10-24/polymarket-says-trump-whale-identified-as-french-trader

^[9] Bloomberg. Polymarket Implements New Insider Trading Rules After Scrutiny, March 2026. https://www.bloomberg.com/news/articles/2026-03-23/polymarket-implements-new-insider-trading-rules-after-scrutiny

^[10] U.S. Department of Justice. U.S. Soldier Charged With Using Classified Information To Profit From Prediction Market Bets, April 2026. https://www.justice.gov/opa/pr/us-soldier-charged-using-classified-information-profit-prediction-market-bets

^[11]CNN. Federal prosecutors are exploring whether prediction market bets trip insider trading laws, March 2026. https://www.cnn.com/2026/03/30/politics/prediction-markets-justice-department

^[12] Trade The Outcome. Polymarket vs Kalshi: Liquidity & Volume Deep Dive, 2026. https://www.tradetheoutcome.com/polymarket-vs-kalshi-liquidity-volume-deep-dive-2026/