Whalesbook
AI Agents Power the 'Agent Economy'
The concept of an 'agent economy,' where autonomous AI systems perform tasks and generate value, is rapidly taking shape in the prediction market sector. Valory AG's Olas protocol is a key element in this development, providing the infrastructure for AI agents to interact with blockchain networks and smart contracts. Polystrat, an AI agent on Polymarket, highlights this transformation. Launched in February 2026, Polystrat trades continuously, operating around the clock to capture opportunities while human participants are inactive. This automated trading capability, combined with its objective, data-driven approach, gives it a significant edge over human traders who can be affected by emotional biases and fatigue.
AI's Performance Advantage
AI agents are showing a clear performance advantage on platforms like Polymarket. While historical data indicates only 7% to 13% of human traders achieve positive returns, AI agents now represent over 30% of wallet activity on Polymarket. Polystrat, for example, executed over 4,200 trades in its first month, achieving single-trade returns as high as 376%. Over 37% of Polystrat's agents reported a positive profit and loss. AI bots like Polystrat are achieving win rates between 59% and 64% in tech-specific markets by monitoring thousands of markets simultaneously. They ingest live data streams, including news, sentiment, and economic indicators, to make split-second probability adjustments. Beyond prediction, AI agents excel at identifying and exploiting pricing inefficiencies through arbitrage, a strategy well-suited to the often-emotional and speculative micro-markets on platforms like Polymarket. These agents leverage logic and consistency to react rationally to irrational market behavior, a core principle in capturing value.
Market Consolidation and the AI Arms Race
Prediction markets have surged into a significant fintech segment, with total notional trading volume projected to exceed $50.25 billion in 2025. This growth is heavily concentrated, with Kalshi and Polymarket collectively dominating 97.5% to 99% of the market share in 2025. Kalshi, with a compliance-focused strategy attracting institutional capital, reported $23.8 billion in volume, while crypto-native Polymarket achieved $22 billion. However, new players like Opinion Trade are emerging, capturing 30-32% of market share in January 2026 and offering innovative non-binary markets. This competitive environment fuels an AI arms race, similar to broader financial markets where AI systems now execute 86% of trading volume and AI-driven funds historically outperform traditional ones by 8-12%. Valory AG, through its Olas protocol, raised $13.8 million in financing, positioning itself as infrastructure for this evolving agent-driven economy. Valory itself secured $4 million in seed funding. The Olas protocol features a modular, core-periphery architecture designed for extensibility and secure coordination of AI agents.
Regulatory and Ethical Hurdles for AI
Despite technological advancements, the rise of AI in prediction markets faces significant regulatory and ethical challenges. Intensifying scrutiny from U.S. lawmakers has led to proposed restrictions on markets concerning sensitive events, and concerns over insider trading are prompting enforcement actions and regulatory oversight. Kalshi has proactively disclosed insider trading cases and established an independent Surveillance Audit Committee, while Polymarket is enlisting Palantir and TWG AI for platform surveillance. The Commodity Futures Trading Commission (CFTC) is navigating a complex regulatory landscape, having rescinded previous proposals and working on a new framework for event contracts. The lack of a clear global regulatory consensus on whether these markets constitute commodity trading or gambling creates ambiguity. Furthermore, critics voice concerns that prediction markets could incentivize manipulation or profit from negative events, requiring careful guardrails. The speed and volume of AI-driven trading also raise systemic risk considerations, reminiscent of flash crashes observed in other algorithmic trading arenas.
AI's Future: Empowering Users
Valory's vision extends beyond superior trading performance to making AI-driven financial tools more accessible. The company champions a future where AI agents empower everyday users, helping prevent people from being left behind in an increasingly automated digital economy, with a focus on user ownership of AI systems. The Olas protocol aims to facilitate this by creating a flexible system for registering, operating, and securing autonomous agents, building an ecosystem where human users can leverage AI for personalized strategies and unlock niche market opportunities. This expands prediction markets as a critical data-gathering tool for broader decision-making across industries. The integration of LLMs and custom workflows is pushing predictive accuracy beyond 70% for state-of-the-art AI models, indicating AI agents will continue to lead market intelligence.