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 part of a small group of informed traders who significantly impact prices on platforms like Polymarket, while the majority of users 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 between 2023 and 2025. The findings indicate that a mere 3% of traders are responsible for the majority of price discovery, consistently predicting outcomes and driving prices in the right direction.

In contrast, the remaining 97% of traders tend to lose money, providing liquidity and volume but ultimately being on the wrong side of trades against the informed minority. To distinguish between skill and luck, the researchers simulated each trader's bets 10,000 times, reversing the direction of their trades. The results showed that only 12% of the biggest winners by raw profit demonstrated genuine skill, with many apparent winners being merely lucky. 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.

Furthermore, these traders are often the first to react to new information, adjusting their positions in response to events like Federal Reserve announcements or corporate earnings. However, the same edge that makes skilled traders valuable to price discovery raises concerns when they may be acting on non-public information.

Both Polymarket and Kalshi have emphasized that trading on non-public information is strictly prohibited. The paper cites the US removal of Nicolás Maduro from power in Venezuela as a concrete example, where three newly created Polymarket accounts placed unusually large bets on the event before it occurred, collectively earning over $630,000.

While insider trades can significantly impact prices, they are relatively rare and concentrated in specific events. The study's findings challenge the conventional wisdom that prediction markets work due to the collective knowledge of their participants, instead suggesting that they are driven by the actions of a small group of informed traders.