Agentic AI for Clustering, Relationship Discovery, and Semantic Trading in Prediction Markets

arXiv:2512.02436v2 Announce Type: replace Abstract: Prediction markets allow users to trade on outcomes of real-world events, but are prone to fragmentation with overlapping questions, implicit equivalences, and hidden contradictions across markets. We present an agentic AI (AAI) pipeline that autonomously recovers cross-market structure from contract text before prices enter the analysis. The workflow first clusters markets into coherent topical groups using natural-language understanding over contract text and metadata, and then identifies contracts within each cluster, but from different event markets, that exhibit strong dependence or leader--follower relationships. We evaluate this system, along with a natural language inference (NLI) benchmark, on a large prediction market dataset from early 2026. Using resolved outcomes to evaluate identified relations, we find that AAI-identified relations are 62.8% consistent with exchange-recorded settlements, whereas the NLI benchmark only achieves 40.6% accuracy. Within clusters, the AAI output is sparse and also remarkably compatible as a signed graph with a frustration rate of 0.324%. As an application, we show how discovered relations inform semantics-based trading strategies on prediction markets. One such strategy yields 14.12% net ROI after fees in a two-month period in 2026. Overall, we demonstrate the potential for agentic AI as a structural discovery layer for prediction markets.

Source: arXiv cs.AI | 2026-08-11