A recent scandal involving a Green Beret arrested for 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 represent an extreme example of a small group of informed traders who significantly influence prices on platforms like Polymarket, while the majority of users 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 from 2023 to 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 tend to be 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% consistently outperformed the benchmark, and many apparent winners did not sustain their performance over time. The study's findings have significant implications for our understanding of prediction markets, suggesting that the accuracy of these markets depends on the activity of a small group of skilled traders rather than the collective knowledge of the broader community.