A recent scandal involving a Green Beret allegedly betting on a classified US raid has shed light on a more significant issue in prediction markets. According to a new study, this incident may be an extreme example of a broader trend, where a small group of informed traders drive price movements 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 mostly provide liquidity and generate volume, but ultimately end up on the losing side of trades against the informed minority. To distinguish between skilled traders and those who are simply lucky, the researchers simulated each trader's bets 10,000 times, using a coin flip to determine the direction of the trade.

The results showed that among the biggest winners, only 12% consistently outperformed the benchmark, while many apparent winners were found to be lucky rather than skilled. The study also found that when skilled traders account for a larger share of trading, market accuracy improves, particularly 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. However, the study raises concerns about the risk of insider trading, particularly when skilled traders 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 outcome, collectively making over $630,000.

While there is no evidence of wrongdoing in this case, the study highlights the potential risks associated with insider trading in 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.