Prediction Market Trading Bots Expose the Myth of “Smart Money”
Genius Sports announced the launch of a new prediction market comparison site on Thursday. One of its features is to track where the “smart money” is going. But what it reveals is that the “smart money” is actually trading bots that buy and sell positions rather than predicting outcomes.
The new platform has a page dedicated to watching the flow of “smart money”.
“Use our free smart money tracker to follow real-time prediction market trades from the Polymarket leaderboard,” the page declares. “See the most profitable wallets from Polymarket whales, with smart money signals ranked by lifetime P&L, trading history, trade size and price on every fill.”
The concept appears useful. Users can track sharp accounts that consistently profit from prediction markets and see where their money is going for their next prediction.
Accounts Appear To Show Accurate Predictions
The account trgparking at Polymarket, for example, is up over $650,000, from trading on esports. A casual viewer might believe this is a gaming expert who can accurately predict the results of esports matches.
The closed positions show some big wins, suggesting a clairvoyant in the gaming world. The account’s active positions are consolidated to show what appear to be predictions for future contests.
Account Activity Shows Rapid Trading To Carve Out Profit
Only when clicking on the account’s activity does the true picture emerge, revealing a barrage of small trades buying and selling to guarantee profit.
In the first screenshot above, it looked like the account made a substantial profit on the Solary vs Team Vitality match, winning over $11,000 on just under $3,000 staked.
In reality, if we check the trades, the account actually traded $16,717.16 on the match, carving out a profit of $1,858.41.
Again, these positions are consolidated and do not show the sheer volume of trading, which can only be explained by a bot. The return of +11.12% on the match is impressive, but it is not something a casual human esports fan can replicate by following the predictions.
Volume Figures Vastly Over-Inflated By Bot Trades
It is not clear who is behind the trgparking account, but it is just one example of many automated trading accounts that dominate prediction markets. In total, the account has traded $18.5 million since joining Polymarket in April.
Trading volume is often cited as evidence of the explosive rise in prediction markets, but it is not to be confused with sportsbook handle. For a detailed breakdown on the difference, see our analysis of trading on the World Cup.
Also rarely reported is how much of the trading volume is bot-driven. With frequent live events, esports is particularly targeted by bots.
In fact, it was the most-traded sport on Polymarket’s international platform in August, with $1.32 billion in trading volume, according to Ollie Ring on Substack.
Over $181 million was traded on the Dota 2 event, The International. In total, 21,936 accounts traded on the event; of these, 2,193 accounted for around $178 million (97.8%).
The largest 220 accounts, almost exactly the top 1%, accounted for 72.8% of the volume, according to analysis by Predictbook. These are all, almost certainly, bots.
Most Prediction Markets Have No Predictive Value
With the high volume of bot trading, there is little a normal user can glean from the “smart money” feature on Genius Sports’ new platform.
There is also questionable value in many other high-volume traded markets. Another area ripe for bot trading is short-term crypto and commodity markets. These have exploded in volume, offering automated trading algorithms more opportunities to quickly buy and sell positions for profit.
Other markets are also targeted by bots when the settlement depends on who reacts first to new information.
For example, the market for LeBron James’ next team was among the most actively traded on Kalshi in July, with over $230 million in volume. The winners were bots.
In the first tenth of a second after LeBron announced he would join the 76ers on X, accounts had purchased 75,000 contracts paying out at roughly 10-to-1 odds, as reported by Gambling Insider.
The true winners of prediction markets are therefore not the smart bettors that can accurately predict events, but the companies that can deploy the fastest bots to hoover up price discrepancies and act on new information.
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