Study Reveals Only a Small Percentage of Traders Drive Accuracy in Prediction Markets

A recent scandal involving a Green Beret's alleged betting on a classified U.S. raid may be more than an isolated incident, according to a new study. The research suggests that this individual may be an extreme example of the small group of informed traders who actually 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 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 correct 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, reversing the direction of the trades. The results showed that among the biggest winners, only 12% consistently outperformed the simulated results, 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, particularly in the final stages before resolution. However, the research raises concerns about the potential for insider trading, citing a concrete example of three newly created Polymarket accounts that placed large bets on a contract related to the removal of Nicolás Maduro from power in Venezuela, just before the operation took place. While there is no evidence of wrongdoing in this case, the study highlights the risk of insider trades and the need for platforms to enforce rules against trading on non-public information.