A recent scandal involving a Green Beret accused of betting on a classified US raid may be more than an isolated incident, according to a new study. The research, conducted by scholars from London Business School and Yale, indicates that a small group of informed traders, like the accused soldier, are actually responsible for driving prices on platforms like Polymarket, while the majority of users incur losses.
The study analyzed 1.72 million accounts and $13.76 billion in trading volume on Polymarket between 2023 and 2025, and found that just 3% of traders are responsible for the majority of price discovery, consistently predicting outcomes and moving prices in the right direction. The remaining 97% of traders provide liquidity and generate volume but tend to lose money to the informed minority. To distinguish between skill and luck, the researchers simulated each trader's bets 10,000 times, and found that among the biggest winners, only 12% consistently outperformed the simulated results. The study's findings suggest that the activity of skilled traders improves market accuracy, particularly in the final stages before an event's resolution, and that they are the first to react to new information.
However, the same edge that makes skilled traders valuable to price discovery also raises concerns about the potential for insider trading, which can have a significant impact on prices. The research highlights the importance of informed traders in driving prediction market accuracy, challenging the notion that crowds are the primary driver of these markets.