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 be an extreme example of a small group of informed traders who drive prices on platforms like Polymarket, while the majority of users 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. 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 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, 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% outperformed the benchmark, and many apparent winners did not sustain their performance over time.
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 same edge that makes skilled traders valuable to price discovery raises concerns when they possess non-public information. The researchers highlight a specific case where three newly created Polymarket accounts placed unusually large bets on a contract related to the US removal of Nicolás Maduro from power in Venezuela, collectively making over $630,000.
While there is no evidence of wrongdoing, the incident underscores the risk of insider trades, which can move prices aggressively. Nevertheless, the study concludes that the accuracy of prediction markets depends on the consistent performance of repeat traders who outperform the market, rather than one-off bets or the collective wisdom of the crowd.