Stocks remain the better wealth-building vehicle for most people because they compound, while prediction markets mostly transfer money from one trader to another and strip out a fee along the way.
Stocks vs Polymarket in 2025: returns and fees
That distinction matters more now as risk appetite in U.S. equities has turned fragile again. The S&P 500 ETF SPY, using a standard 50-day moving average and RSI readings as conventional technical indicators, has slid back toward $735 after a sharp November shakeout, while the Nasdaq-100 ETF QQQ has dropped to about $656 and the Russell 2000 ETF IWM has given back much of its autumn rebound. The broader market still sits well above its 200-day moving average, but the latest downdraft is a reminder that even in a volatile year, long-only equity exposure has a built-in engine that prediction contracts do not.
Sentiment Indicators
The economic case is straightforward. A Motley Fool analysis of about 313,000 Polymarket wallets across 210 high-volume markets found that more than 82% of wallets lost money in 2025, even before Polymarket began charging broader fees in 2026. The median wallet lost just 16 cents, which sounds trivial until you realize the winners were heavily concentrated: the top 1% of profitable wallets captured about 85% of all gains. In other words, the average user is not participating in an asset class with broad wealth creation. They are entering a negative-sum arena where fees and the house structure work against them.
That is why investors should not confuse popularity with productivity. Prediction markets are growing because they are easy to access, fast, and tied to real-world events that feel knowable, from elections to Fed decisions to sports. But convenience does not create compounding. Stocks do, because ownership in profitable companies entitles investors to earnings growth, buybacks and dividends. That is why the S&P 500 has historically returned about 9.98% a year since 1928, including dividends, and why a $1,000 investment can grow to $6,703 over 20 years at that pace. In prediction markets, winnings come from another trader’s loss, and once fees are added, the structure becomes even harsher.
For investors, the lesson is not that prediction markets are useless. They can be a useful venue for hedging, event pricing and short-term views. But they are a poor substitute for capital formation. The market is underestimating how much of today’s retail enthusiasm is being siphoned into fee-generating speculation instead of productive assets with long-duration earnings power. That is especially important in a year when AI infrastructure, chipmakers and megacap platforms continue to dominate index returns while smaller traders chase quick payouts in event markets.
The more durable opportunity, in my view, remains in equities tied to real cash flow, data-center spending, energy demand and the infrastructure required to support AI. If you want asymmetric upside, own the toll roads of the digital economy — not the side bets. Prediction markets may be entertaining, but stocks are still the place where patience gets paid.
| Entity | Gains | Losses |
|---|---|---|
| Long-term stock investors | ▲Compounding returns | ▼None if diversified |
| Polymarket traders | ▲Rare top winners | ▼Most wallets, fees |
| Platform operators | ▲Trading fees | ▼N/A |
| S&P 500-linked funds | ▲Broad capital appreciation | ▼Short-term volatility |
