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 the soldier's actions may be an extreme example of a small group of informed traders who significantly 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 right direction.

In contrast, the remaining 97% of traders provide liquidity and generate volume but tend to be on the losing side of trades. 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 only 12% of the biggest winners by raw profit consistently outperformed the simulated results, suggesting that many apparent winners may have been lucky rather than skilled. The study also found that when skilled traders account for a larger share of trading, prices move closer to the correct outcome, especially in the final stages before resolution. However, the research raises concerns about the potential for insider trading, particularly when non-public information is involved. The paper cites the example of the US removal of Nicolás Maduro from power in Venezuela, where three newly created Polymarket accounts placed large bets on the event before it occurred, collectively making over $630,000.

While the study does not provide evidence of wrongdoing, it highlights the risk of insider trading and the need for platforms to monitor and prevent such activities. Ultimately, the findings challenge the idea that prediction markets work due to the collective knowledge of their participants, suggesting instead that they rely on the expertise of a small group of informed traders.