Do Liquidity Rewards on PMs Work? ... Only if They're Huge!

Taetaehoho analyzed liquidity rewards on Polymarket and sponsorships on Kalshi from February to May 2026, finding they only move top-of-book liquidity when daily spend exceeds 1% of existing book depth—below that, median programs show no effect. Even at higher intensities, incentive size poorly predicts actual liquidity response; pre-existing conditions like spread width matter more. The thesis: prediction market liquidity requires structural innovation beyond rewards alone.