A recent scandal involving a Green Beret arrested for betting on a classified U.S. raid may be more than an isolated incident, as a new study suggests that informed traders like him are the ones who actually influence prices on platforms like Polymarket, while the majority of participants end up losing money. 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, and found that a mere 3% of traders are responsible for the majority of price discovery, consistently predicting outcomes and moving prices in the right direction.
In contrast, the remaining 97% of traders tend to lose money, providing liquidity and generating volume but ultimately being on the wrong side of trades against the informed minority. To distinguish between skill and luck, the researchers simulated each trader's bets 10,000 times, and found that only 12% of the biggest winners by raw profit consistently outperformed the benchmark, while many apparent winners did not sustain their performance over time.
The study's findings indicate 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, such as Federal Reserve announcements or corporate earnings. However, the same edge that makes skilled traders valuable to price discovery also raises concerns about the potential for insider trading, which could have significant implications for the integrity of prediction markets.