The extreme genome reduction and physiological simplicity of some microsporidia has been attributed to their intracellular, obligate parasitic lifestyle. Although not all microsporidian genomes are small–the known size range goes from about 2 to 50 MB–it is widely accepted that microsporidian genome size has been streamlined by natural selection. We explore an alternative hypothesis for microsporidian genome diversification, i.e ., that vertical transmission in microsporidia likely produces population bottlenecks, reducing the effectiveness of natural selection. We compared the transposable element (TE) content of 47 microsporidian genomes, and showed that genome size is positively correlated with the amount of TEs, and that species that experience vertical transmission have larger genomes with higher proportion of TEs. Our findings are consistent with earlier studies inferring that nonadaptive processes play an important role in microsporidian evolution.