Why Almost Everyone Loses on Prediction Markets

Summary

WSJ What’s News — Episode Summary
Episode Title: Why Almost Everyone Loses on Prediction Markets
Date: May 4, 2026
Host: Daniel Bach (for The Wall Street Journal)

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Overview

This episode dives deep into the recent boom in prediction markets, with a focus on platforms like Kalshi and Polymarket. Despite promises of easy wins and democratized access, a Wall Street Journal investigation finds that most users are actually losing money. The episode also includes coverage of the economic impact of the ongoing Iran conflict (notably on airlines and the auto sector), a high-stakes GameStop/eBay acquisition move, and a surprising look at BlackBerry’s business transformation.

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Key Discussion Points & Insights

1. Major News Headlines & Market Moves

(00:33–06:52)

• Strait of Hormuz Plan: President Trump unveils “Project Freedom” to open up shipping in the critical oil passageway, but the plan’s lack of military escorts means oil traders remain skeptical, driving Brent crude above $109/barrel.
  • “But critics point to how the plan doesn't involve naval escorts. Instead, Project Freedom allows for countries, insurance companies and shippers to coordinate in a bid to get traffic flowing.” — Daniel Bach (01:11)
• Impact on Airlines: Spirit Airlines shutters operations as fuel costs surge, unable to survive the Iran war-related price hikes. Other airlines cap ticket prices for stranded travelers.
• Aluminum Price Shock: The U.S. auto industry faces a severe aluminum shortage and 90% price spike due to supply disruptions and tariffs.
  • “The automotive industry depends on aluminum because it's lightweight and the more you use, the better your fuel economy.” — Bob Teda (03:22)
• GameStop’s Bid for eBay:
  • GameStop makes a bold, unsolicited $56bn offer for eBay, aiming to rival Amazon, and threatens a proxy fight if rejected.
  • “If the e-commerce company isn't receptive to the proposal, he's prepared to launch a proxy fight and take the offer directly to its shareholders.” — Daniel Bach (05:10)
• Anthropic’s Big Investment: Finalizing a $1.5bn joint venture with Blackstone, Goldman Sachs, and others to sell AI tools, especially to private equity-backed firms.

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2. Deep Dive: Why Most People Lose on Prediction Markets

(06:52–10:52)

The Promise vs. Reality

• Prediction markets like Kalshi and Polymarket heavily market themselves as democratized platforms where “anyone can monetize their beliefs and win.”
  • “There's this one ad on Kalshi that features a young woman who said she was about to not be able to pay her rent, but then made a bunch of money on Kalshi.” — Neil Mehta (07:19)
• The reality: the majority of users end up losing money.
  • “On Kalshi...there’s three losers for every single winner. And on Polymarket, around 70% of users have lost money. But on top of that...two thirds of all of the profits on the site have gone to just a tenth of a percent of users.” — Neil Mehta (07:33)

How the Odds Work Against Casual Bettors

• “Mention markets” (betting on whether specific words will be said in speeches/interviews) are popular but misleading.
  • “On average, when you bet yes on an event that has a 50% probability, it'll only pay out around 40% of the time. And if you do what most casual bettors do and just put your money on yes at the first price that you see, you'll lose 11% of your money on average.” — Neil Mehta (08:21)
• The expected loss is worse than on Las Vegas slot machines.

Case Study: The Downward Spiral of a User

• John Peterson, a Detroit line cook, suffered a car accident and turned to betting after taking out a loan. Initially turned $2k into $41k on sports and weather markets.
• Lost everything on a technicality in a mention market:
  • “He bet all of his money that the rapper A$AP Rocky would say the word rapper on the Tonight show...But the version of his interview that got broadcasted cut that part out. And...a mention only counted if it was actually broadcast on tv. Peterson ended up losing all of his money. When we last spoke with him, he was living in a homeless shelter in Detroit.” — Neil Mehta (09:17)

Winners Are Algorithmic Power Users

• The profits are severely skewed to high-frequency, professional traders using advanced algorithms:
  • “Among them are these very large firms that have full time staff members and can pay millions of dollars for specialty data to make algorithmic trades...In fact, it's these highest frequency traders, those in the top tenth of a percent of frequency, where users are most likely to make a profit.” — Neil Mehta (09:49)
  • Example: Michael Boss, former pro poker player, runs 60 trades/minute, changing orders up to 30 times/second.

Platform Responses

• Polymarket declined to comment.
• Kalshi claimed similar patterns exist in financial markets, and users are more likely to be profitable than in traditional day trading or sports betting. They’ve also dropped the controversial “pay my rent” ad.

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3. BlackBerry: Reinvention Behind the Scenes

(10:52–13:24)

• While BlackBerry’s smartphone fame fizzled, its QNX operating system is now a hidden backbone for modern safety-critical tech in cars, hospitals, and factories.
  • “QNX...now accounts for about 50% of the company's revenue, is the fastest growing part of BlackBerry, and it makes foundational software in cars, for hospitals, in all sorts of mission critical applications where safety is key.” — Ben Cohen (11:41)
• BlackBerry’s “turnaround” is real, but relative:
  • “The BlackBerry story is now a growth story...Now it's worth saying that it's a growth story in a way. Since its all-time high...the stock is down 96%. Company used to be worth more than $80 billion. Now it has a market cap of $3 billion. But...BlackBerry is sending a message: we are back and we are in your lives even if you don't actually realize it.” — Ben Cohen (12:38)

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Notable Quotes & Memorable Moments

• On misleading optimism with prediction markets:
  • “But what they don't mention is that you'll probably lose.” — Neil Mehta (07:35)
• On the odds stacked against casual users:
  • “Those returns are worse than what you'd see on the average slot machine in Las Vegas.” — Neil Mehta (08:31)
• On profit concentration:
  • “Two thirds of all of the profits on the site have gone to just a tenth of a percent of users.” — Neil Mehta (07:46)
• On BlackBerry’s unlikely survival:
  • “The idea of BlackBerry being a growth story sounded insane to me.” — Ben Cohen (12:38)

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Timestamps for Important Segments

• Strait of Hormuz and Related Economic Impacts: 00:33–04:41
• GameStop–eBay, Anthropic Moves: 04:41–06:18
• Prediction Markets Investigation (Main Segment): 06:52–10:52
• BlackBerry’s Reinvention: 10:52–13:24

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Tone and Takeaways

The episode maintains WSJ’s authoritative, brisk style, blending critical financial headlines with a sharp investigation into online betting markets. The investigation makes clear that prediction markets, often pitched as democratizing finance, predominantly benefit a select few highly sophisticated (and often institutional) players—leaving the average user at a statistical disadvantage.

Listeners are left with both cautionary tales for would-be prediction market participants, and a surprising appreciation for old tech surviving in unseen forms.

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End of Summary

Transcript

[Amazon Quick Representative]

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[Daniel Bach]

President Trump announces a new plan for opening the Strait of Hormuz, but traders seem unconvinced. Plus, GameStop makes a massive play for e commerce giant ebay, and the Journal reveals why most prediction market bets end in a loss.

[Neil Mehta]

Cauchy and Polymarket have pitched themselves as this everyman's platform where anyone can monetize their beliefs and win. But what they don't mention is that you'll probably lose.

[Daniel Bach]

It's Monday, May 4th. I'm Daniel Bach for the Wall Street Journal, filling in for Luke Vargas. And here is the AM edition of what's news, the top headlines and business stories Moving your world today. President Trump has said the US Would begin guiding commercial ships out of the Strait of Hormuz today in an effort to unblock the waterway. But critics point to how the plan doesn't involve naval escorts. Instead, Project Freedom allows for countries insurance companies and shippers coordinate in a bid to get traffic flowing through the strait. For now, though, oil traders appear unconvinced it will resolve a supply crunch that has sent prices soaring. Futures tied to Brent crude rose above $109 a barrel this morning, and those higher oil prices have led to a surge in fuel costs for airlines. With the sector this weekend claiming its first victim of the war, Spirit Airlines has shut down after bailout talks with the Trump administration failed before the war in Iran, the low cost carrier had plans to get out of bankruptcy, but with its jet fuel more than doubling since the airline couldn't pull through. Like many affected travelers, Journal reporter Dean Seal had a flight already on the books. He's looked into what customers need to know following the airline's closure.

[Spirit Airlines Representative]

The airline said all flights have been canceled and that it will automatically process refunds for tickets bought with a credit or debit card. Customers can go to spiritrestructuring.com for more information. The Department of Transportation said Saturday that several airlines are offering a mix of capped and reduced fares for impacted Spirit customers.

[Sean Duffy]

United, Delta, JetBlue and Southwest are capping their ticket prices for Spirit customers. It's going to vary between the airlines. You have to go to their websites to take advantage of these special offers. It is normally going to be about $200 for a one way ticket.

[Daniel Bach]

That was U.S. transportation Secretary Sean Duffy. Another sector suffering from the war in Iran is the auto industry. The war is driving up U.S. aluminum prices by choking off critical shipments from the Persian Gulf. Combined with a 50% tariff and a major supplier outage, the cost of primary aluminum from smelters is nearly 90% higher than a year ago. The supply crunch leaves the auto industry facing a severe shortage for a metal that has become critical for truck building.

[Bob Teda]

The automotive industry depends on aluminum because it's lightweight and the more you use, the better your fuel economy is because you're taking weight out of a vehicle.

[Daniel Bach]

That's Journal reporter Bob Teda, who covers the metals industry. He says that the pain is especially acute at Ford. Aluminum is used in the best selling vehicle in the US the F150 pickup.

[Bob Teda]

So Ford is the biggest user of aluminum from the plant in Oswego, New York, operated by Novelis, and it can't get enough aluminum. It's caused a slowdown in production of the F150s. So there's dealers that are nervous about having enough trucks to sell, particularly now in the summer months. There's been some discussion about particularly in the steel industry, would automotive companies start to use more steel because it's somewhat less expensive and there's a lot of it in the United States, it's not something that can be done quickly. Ford last week said that it expects its commodity cost to increase by about $2 billion this year. Most of that comes from paying more for aluminum, according to the company.

[Daniel Bach]

Ford recently asked the Trump administration to waive the 50% tariff on imported aluminum until its primary supplier, the Oswego plant, returns to full service. So far, administration officials have refused to budge on the request. In markets news, we're exclusively reporting that GameStop has made an unsolicited offer to buy ebay for about $56 billion. In an interview with the Journal, GameStop CEO Brian Cohen said ebay can be a much bigger rival to Amazon. He said GameStop has built a roughly 5% stake in eBay and that if the e commerce company isn't receptive to the proposal, he's prepared to launch a proxy fight and take the offer directly to its shareholders. And we report Gamestop is offering a roughly 20% premium to eBay's Friday closing price and that the video game company has a commitment letter from TD bank to provide up to $20 billion in debt financing to help make a deal possible. And Anthropic is finalizing a deal to create a joint venture with Blackstone, Goldman Sachs and a handful of other Wall street firms to sell AI tools to companies backed by private equity. All told, about $1.5 billion is expected to be committed to the company would act as a consulting arm for Anthropic to help teach businesses how to incorporate AI across their operations. Anthropic, Blackstone and Hellman and Friedman are anchoring the deal, which could be announced as soon as today. Coming up, prediction markets have become wildly popular, even though almost everyone is losing that story and more after the break.

[CLA Representative]

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[Daniel Bach]

The amount of money traded on prediction markets like Calshi and Polymarket has surged over the past year, with users trying to hit it big by betting on sports celebrities and sometimes seemingly random or very specific news. But now a journal investigation has found that most people are losing money on prediction markets. Neil Mehta is one of three journalists who led the investigation.

[Neil Mehta]

Kalshi and Polymarket have pitched themselves as this everyman's platform where anyone can monetize their beliefs and win. There's this one ad on Kalshi that features a young woman who said she was about to not be able to

pay her rent, but then made a

bunch of money on Kalshi. And the message from these ads is that you too can win. But what they don't mention is that you'll probably lose. So on Kalshi, based on data from the past month, there's three losers for every single winner. And on Polymarket, around 70% of users have lost money. But on top of that, on Polymarket, two thirds of all of the profits on the site have gone to just a tenth of a percent of users.

[Daniel Bach]

Our reporting also looked at mention markets, which allow people to bet on how likely a word is to be mentioned in an interview or speeches like the State of the Union. But Neil explains these bets are not the 5050 chance that many people think they are.

[Neil Mehta]

We analyzed 35,000 mentioned markets on Kalshi and saw that on average when you

bet yes on an event that has

a 50% probability, it'll only pay out around 40% of the time. And if you do what most casual bettors do and just put your money

on yes at the first price that you see, you'll lose 11% of your money on average. Those returns are worse than what you'd see on the average slot machine in Las Vegas.

[Daniel Bach]

Let's.

[Neil Mehta]

We spoke to a 33 year old line cook from Detroit named John Peterson. John got into a car accident and couldn't work, but he still needed to make money. So he took out a loan and began betting on Kelshi instead.

At first he did pretty well.

He was betting on sports and weather markets and turned $2,000 into $41,000. But then he took a big bet on a mention market. He bet all of his money that the rapper A$AP Rocky would say the word rapper on the Tonight show. And technically A$AP Rocky did end up

saying the word rapper.

But the version of his interview that got broadcasted cut that part out. And according to the market's rules, a mention only counted if it was actually broadcast on tv. Peterson ended up losing all of his money. When we last spoke with him, he was living in a homeless shelter in Detroit.

[Daniel Bach]

The mentioned markets that cost Peterson everything are particularly popular with young, inexperienced users. That's in stark contrast with the professional traders using advanced algorithms to gain the upper hand.

[Neil Mehta]

We also spoke to some of the winners on Kalshian Polymarket and among them are these very large firms that have full time staff members and can pay millions of dollars for specialty data to make algorithmic trades up to tens of thousands of times every single day. In fact, it's these highest frequency traders, those in the top tenth of a percent of frequency, where users are most likely to make a profit. One of these traders is Michael Boss, who used to be a pro poker player and has a statistics background. He places 60 trades every single minute and changes his orders up to 30 times a second. Polymarket declined to comment on our analysis. A spokeswoman for Kalshi said that there are many financial markets that have similar patterns of wealth concentration and that on Kalshi you're more likely to end up profitable than if you were day trading on public markets or betting on a sports betting site. Kalshi also said that they don't run the ad about paying your rent anymore.

[Daniel Bach]

That was Journal reporter Neil Mehta. The Journal used only publicly available data for this analysis and we should Note polymarket has a data partnership with Wall street journal publisher Dow Jo. And finally, do you ever wonder what happened to BlackBerry? Well, after its clicky keyboard was essentially made obsolete by the iPhone, the company formerly known as Research in Motion abandoned the smartphone business a decade ago. But you probably had no idea that millions of people still rely on BlackBerry every day and not hardware software. Journal columnist Ben Cohen has been writing about QNX, an operating system controlling safety features in some 275 million cars on the road today.

[Ben Cohen]

QNX, which was this division of BlackBerry that most people had never heard of, including people inside BlackBerry, now accounts for about 50% of the company's revenue, is the fastest growing part of BlackBerry, and it makes foundational software in cars, for hospitals, in all sorts of mission critical applications where safety is key. They're in 50 plus medical devices including heart pumps and surgical robots and basically any MRI machine that you're in. They also look at robotics and industrial automation as like the next frontier of qnx. So they want to be in factories basically anywhere where there is technology that just can never afford to fail.

[Daniel Bach]

QNX was acquired in 2010 to help with the next generation of BlackBerrys. While that never quite happened, it's now helping lead a revival.

[Ben Cohen]

On the most recent BlackBerry earnings call, the CEO of BlackBerry himself said the turnaround is complete. The BlackBerry story is now a growth story. That is actually the quote that got me into this story because it just seemed like some kind of oxymoron. The idea of BlackBerry being a growth story sounded insane to me. Now it's worth saying that it's a growth story in a way since its all time high. Since the stock peaked in 2008, the stock is down 96%. Company used to be worth more than $80 billion. Now it has a market cap of $3 billion. But from where it's been over the past decade to where it is now, BlackBerry is sending a message. We are back and we are in your lives even if you don't actually realize it.

[Daniel Bach]

And that's it for what's news for this Monday morning. Today's show was produced by Hattie Moyer. Our supervising producer is Sandra Kilhoff and I'm Daniel Bok for the Wall Street Journal. We will be back in your life tonight with the new show unencrypting the day's news on whatever device you're tuning in from. Until then, thanks for listening.

[Goldman Sachs Podcast Host]

What's driving the markets this week? What's on investors minds as they look ahead? Find out on the markets podcast from Goldman Sachs. A breakdown of market moves and macro signals in 10 minutes or less. The Markets podcast from Goldman Sachs. Listen now.