A recent scandal involving a Green Beret arrested for wagering on a classified US raid may be more than an isolated incident, as a new study suggests it could be an extreme example of the small group of informed traders who significantly influence prices on Polymarket, while the majority of traders 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, 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 primarily provide liquidity and generate volume, but ultimately end up 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, and discovered that among the biggest winners by raw profit, only 12% outperformed the benchmark, and many apparent winners did not sustain their performance over time. The study's findings indicate that the activity of skilled traders enhances market accuracy, particularly in the final stages before resolution, and that they are the first to react to new information. However, the same edge that makes skilled traders valuable to price discovery also raises concerns when that information is not publicly available or is sensitive.
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 contract before the operation, and collectively made over $630,000. While insider trades are 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, and instead suggest that they work because of the informed traders who drive price discovery.