The Anatomy of a Blockchain Prediction Market: Polymarket in the 2024 U.S. Presidential Election

TL;DR

This paper analyzes the Polymarket prediction market for the 2024 U.S. Presidential Election using on-chain data, introducing a transaction-level accounting framework that improves understanding of market activity and quality.

Contribution

It develops a novel transaction-level framework for analyzing prediction markets, separating different types of trading activity and measuring market quality improvements.

Findings

Naive volume reports $958M; decomposition reports $391M.

Market arbitrage-deviation half-lives decreased from hours to under a minute.

Large account activity indicated heterogeneous-beliefs trading, not manipulation.

Abstract

Using on-chain Polygon data, we analyze Polymarket's 2024 U.S. Presidential Election market and develop a transaction-level accounting framework with two components: a volume decomposition that separates exchange-equivalent turnover from share minting and burning, and trader-level disagreement measures. Naive aggregation reports $958M of October Trump-market volume, compared with $391M under our decomposition. Market quality improved as arbitrage-deviation half-lives fell from hours to under a minute and Kyle's {\lambda} dropped from 0.53 to 0.01. During October's large-account episode, capital flowed into both sides simultaneously, consistent with heterogeneous-beliefs trading rather than one-sided manipulation. The framework generalizes to other tokenized prediction markets.