A recent scandal involving a Green Beret's alleged 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, conducted by researchers from the London Business School and Yale, analyzed over 1.7 million accounts and $13.7 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 moving prices in the correct direction. In contrast, the remaining 97% of traders primarily 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 only 12% of the biggest winners by raw profit consistently outperformed the benchmark, while many apparent winners did not sustain their performance over time.
The study's findings have significant implications for the functioning of prediction markets, highlighting the importance of skilled traders in driving market accuracy. When these traders account for a larger share of trading activity, prices tend to move closer to the correct outcome, particularly 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 non-public information is involved. The study cites the example of the US removal of Nicolás Maduro from power in Venezuela, where three newly created Polymarket accounts placed unusually large bets on the contract asking whether Maduro would be removed, collectively making over $630,000 when the raid occurred.
While there is no evidence of wrongdoing in this case, the incident highlights the risks associated with insider trading in prediction markets. Ultimately, the study's findings challenge the notion that prediction markets work due to the collective wisdom of the crowd, instead suggesting that they are driven by the actions of a small group of informed traders.