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 drive price movements 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, 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, finding that only 12% of the biggest winners by raw profit consistently outperformed the benchmark. The study's findings have significant implications for the functioning of prediction markets, highlighting the importance of skilled traders in driving market accuracy and raising questions about the role of insider information in these markets.