Study Reveals Only 3% of Traders Determine Prediction Markets' Accuracy

A recent scandal involving a Green Beret arrested for betting on a classified U.S. raid may be more than an isolated incident, according to a new study. The research suggests that the soldier may be an extreme example of a small group of informed traders who actually influence prices on Polymarket, while the majority of traders lose money around them. 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 from 2023 to 2025. The findings indicate that just 3% of traders are responsible for most price discovery, meaning they are the ones who move prices towards the correct outcome. These traders consistently predict outcomes and move prices in the right direction, while the remaining 97% of traders mostly do not. The researchers used a novel approach to filter out luck from skill, rerunning each trader's bets 10,000 times with the same markets, moments, and dollar amounts, but with a coin flip deciding whether to buy or sell. The results show that among the biggest winners by raw profit, only 12% beat the benchmark, and many apparent winners did not sustain their performance over time. The study's findings have significant implications for our understanding of how prediction markets work, suggesting that it is the informed minority, rather than the crowd, that drives market accuracy.