A recent scandal involving a Green Beret accused of betting on a classified US raid may be more than just an isolated incident, according to a new study. The research, conducted by scholars from the London Business School and Yale, indicates that the soldier's actions may be an extreme example of the small group of informed traders who drive price movements on platforms like Polymarket, while the majority of users suffer losses. The study analyzed 1.72 million accounts and $13.76 billion in trading volume on Polymarket between 2023 and 2025, and found 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 tend to 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, only 12% consistently outperformed the benchmark, and many apparent winners did not sustain their performance over time. The study's findings suggest that the activity of skilled traders improves market accuracy, particularly in the final stages before an event's resolution, and that they are often the first to react to new information.
However, the same edge that makes skilled traders valuable to price discovery also raises concerns about the potential for insider trading, particularly when non-public information is involved. The researchers point to a specific example, in which three newly created Polymarket accounts placed large bets on a contract related to the removal of Nicolás Maduro from power in Venezuela, just before the operation took place. While there is no evidence of wrongdoing in this case, the incident highlights the risks associated with insider trading and the need for prediction markets to ensure that their users are not trading on non-public information.