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 suggests that this individual may be part of a small group of informed traders who significantly influence prices on platforms like Polymarket, while the majority of participants 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 ultimately end up 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 bet 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 the activity of skilled traders improves market accuracy, particularly in the final stages before resolution, and that they are the first to react to new information.

However, the same edge that makes skilled traders valuable to price discovery raises concerns when they have access to non-public information. The researchers cite 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 there is no evidence of wrongdoing in this case, the study highlights the risk of insider trades, which can move prices aggressively and undermine the integrity of prediction markets. Ultimately, the findings challenge the idea that prediction markets work due to the collective knowledge of their participants, instead suggesting that they are driven by the actions of a small group of informed traders.