Prediction Markets Hit Record Trading Volume as Fragmentation Concerns Mount

Source: CryptoNewsNet Original Title: Prediction Markets Hit Record Trading Volume as Fragmentation Concerns Mount Original Link:

Overview

Prediction markets posted a record $3.7 billion in weekly trading volume last week, with weekly notional volume surging to $5.57 billion—an all-time high. This acceleration reflects rising interest in event-based trading across political events, crypto-related outcomes, and sports markets.

Growing User Engagement and Market Concentration

Weekly active users peaked at 335,583 in the first week of January, while transaction counts followed a similar upward trajectory. Activity remains concentrated, with three categories—political events, sports, and crypto-related markets—accounting for the majority of weekly notional volume on platforms like Polymarket and Kalshi.

Extreme Trader Outcomes

At the individual trader level, outcomes vary dramatically. One Polymarket trader reportedly moved from $6.8 million in losses to approximately $395,000 in profit after betting on sports outcomes. Over the past two days, this trader profited more than $10.5 million across five successful predictions, with bet sizes surging from hundreds of thousands to over $3 million per bet.

However, not all traders succeed. Two Polymarket users lost nearly $10 million in less than a month betting on sports markets at 48¢-57¢ odds—essentially coin-flip scenarios where larger bets simply accelerate losses.

Major Players Enter the Market

Beyond retail users, major industry players are capitalizing on the trend. A certain head-level exchange is reportedly preparing to launch its own prediction markets, while a certain compliant platform affiliate has secured regulatory approval for US customers. Trump Media & Technology Group has signaled intentions to enter the space, and a sports platform announced the launch of a fan-led prediction market platform through a strategic partnership with a major exchange.

Growing Concerns: Fragmentation and Insider Trading

Experts have raised concerns about the sector’s trajectory. Some argue that permissionless market creation incentivizes fragmentation, with creators earning fees from volume-generated activity. Others contend that liquidity fragmentation is the core issue, with numerous zero-liquidity markets created solely to generate creator fees.

Beyond fragmentation, insider trading has emerged as a pressing concern. A series of recent episodes raises questions about whether non-public information shapes market outcomes:

• Three wallets collectively recorded profits exceeding $630,000 on Polymarket after wagering on a major political figure’s removal before the event was publicly announced
• A trader reportedly generated close to $1 million from bets tied to a tech company’s annual search results
• On Polymarket, users placed 27 wagers on major entertainment awards, with 26 settling in the money—an unusually accurate result suggesting potential insider knowledge

These patterns have fueled growing concerns that prediction platforms may be vulnerable to information asymmetries and insider trading dynamics.