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 the small group of informed traders who actually influence prices on platforms like Polymarket, while the majority of participants incur losses. The study, which analyzed 1.72 million accounts and $13.76 billion in trading volume on Polymarket from 2023 to 2025, found 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 against the informed minority.
To distinguish between skill and luck, the researchers simulated each trader's bets 10,000 times, keeping everything the same except the direction. The results showed that among the biggest winners by raw profit, only 12% consistently outperformed the benchmark, and many apparent winners did not sustain their performance over time. The study's findings have significant implications for our understanding of how prediction markets work, suggesting that it is the activity of skilled and informed traders that improves market accuracy, rather than the collective wisdom of the crowd. When skilled participants account for a larger share of trading, prices tend to 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 also raises concerns about the potential for insider trading, particularly when information is not publicly available or is sensitive in nature.