A recent scandal involving a Green Beret who bet on a classified US raid may be more than an isolated incident, according to a new study. The research suggests that this individual may represent an extreme example of a small group of informed traders who significantly influence prices on platforms like Polymarket, while the majority of users incur losses. The study, conducted by researchers from London Business School and Yale, analyzed 1.72 million accounts and $13.76 billion in trading volume on Polymarket between 2023 and 2025. The findings indicate that just 3% of traders are responsible for most price discovery, consistently predicting outcomes and moving prices in the right direction.

In contrast, the remaining 97% of traders primarily provide liquidity and generate volume, but tend to be on the losing side of trades against the informed minority. To distinguish between skill and luck, the researchers simulated each trader's bets 10,000 times, using the same markets, moments, and dollar amounts, but with the direction of the trade determined by a coin flip.

The results showed that among the biggest winners by raw profit, only 12% outperformed the benchmark, and many apparent winners did not sustain their performance over time. The study also found that when skilled traders account for a larger share of trading, prices tend to move closer to the correct outcome, especially in the final stages before resolution. Furthermore, these traders are often the first to react to new information, such as Federal Reserve announcements or corporate earnings, while other traders show little consistent response.

However, the same edge that makes skilled traders valuable to price discovery raises concerns when they may be trading on non-public information. Both Polymarket and Kalshi have stated that trading on non-public information is strictly against their rules. The paper highlights the risk of insider trading, citing the example of the US removal of Nicolás Maduro from power in Venezuela, where three newly created Polymarket accounts placed unusually large bets on the contract before the event, collectively making over $630,000. While insider trades are rare and concentrated in a handful of events, the study's findings challenge the idea that prediction markets work due to the collective knowledge of their participants, instead suggesting that they work because of the presence of informed traders.