Study Reveals Only a Small Percentage of Traders Drive Prediction Market Accuracy

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, conducted by Roberto Gómez-Cram, Yunhan Guo, Theis Ingerslev Jensen, and Howard Kung of London Business School and Yale, indicates that a small group of informed traders, like the accused soldier, are actually responsible for moving prices on Polymarket, while the majority of participants lose money around them. The study analyzed 1.72 million accounts and $13.76 billion in trading volume from 2023 to 2025, revealing that just 3% of traders account for most 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 are largely 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, finding that only 12% of the biggest winners by raw profit consistently outperformed the benchmark. The study's findings suggest that the activity of skilled traders improves market accuracy, particularly in the final stretch 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 raises concerns when that information is not public or is not supposed to be. The research highlights the risk of insider trading, citing the example of the US removal of Nicolás Maduro from power in Venezuela, where three newly created Polymarket accounts placed unusually large bets before the event. While insider trades are rare and concentrated in a handful of events, the study's findings challenge the idea that prediction markets work due to the collective knowledge of participants, instead suggesting that they work because of the informed traders who drive price discovery.