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's actions could be an extreme example of a small group of informed traders who actually influence prices on platforms like Polymarket, while the majority of users incur losses. The study, conducted by researchers from the 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 the majority of price discovery, consistently predicting outcomes and moving prices in the right direction.

In contrast, 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, using the same markets, moments, and dollar amounts but randomly deciding whether to buy or sell.

The results showed that only 12% of the biggest winners by raw profit consistently outperformed the simulated benchmarks, suggesting that many apparent winners may have simply been lucky. 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, adjusting their positions in response to events like Federal Reserve announcements or corporate earnings. However, the same edge that makes skilled traders valuable to price discovery also 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 prohibited. The research highlights the risk of insider trading, citing the example of the U.S.

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 can significantly impact prices, they are relatively rare and concentrated in a few events.

The study's findings challenge the notion 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.