A recent scandal involving a Green Beret who bet 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 actually influence 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 the majority of 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, keeping all variables constant except the direction of the trade. The results showed that among the biggest winners, 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 activity, market accuracy improves, particularly in the final stages before an event's resolution. However, the same edge that makes skilled traders valuable to price discovery raises concerns when they may be acting on non-public information. The researchers cite the example of the US removal of Nicolás Maduro from power in Venezuela, where three newly created accounts placed unusually large bets on a contract related to the event, collectively making over $630,000. While there is no evidence of wrongdoing in this case, the study highlights the risk of insider trades and the need for prediction markets to ensure that trading is based on public information.