A new study indicates a small faction of well-informed traders primarily influences price movements on platforms like Polymarket, contrary to the widespread belief that crowds drive market accuracy. This research highlights an issue reminiscent of TheGreen Beret’s arrest for betting on classified information: a few informed traders significantly impact predictions while most participants incur losses.
The working paper by Roberto Gómez-Cram, Yunhan Guo, Theis Ingerslev Jensen, and Howard Kung from London Business School and Yale scrutinizes Polymarket transactions from 2023 to 2025. Out of the 1.72 million accounts analyzed with $13.76 billion in trading volume, a mere 3% of traders are responsible for most price discovery. These proficient traders consistently move prices toward correct outcomes, unlike the remaining 97%, who mainly supply liquidity and generate volume but collectively lose against the informed minority.
Differentiating skill from luck among over a million Polymarket traders is challenging, as many may achieve significant gains by chance. The researchers employed a methodology of simulating each trader’s bets 10,000 times with randomized buy or sell decisions to establish a benchmark for profits devoid of any real advantage. This approach revealed that only 12% of the top earners surpassed this benchmark, and approximately 60% of those initially deemed lucky were actually losing when their performance was assessed against a separate set of events.
The study demonstrates that skilled traders enhance market accuracy, particularly as resolutions near. These participants promptly adjust to new information like Federal Reserve announcements or corporate earnings, whereas others remain inconsistent. However, the same advantage poses ethical concerns if it stems from non-public information, which is prohibited by platforms such as Polymarket and Kalshi.
A concrete case illustrating this risk was observed prior to Nicolás Maduro’s removal in Venezuela. Three new accounts on Polymarket placed unusually large bets on his ousting days before the event, ultimately profiting over $630,000 when the raid occurred. Despite these actions, no wrongdoing evidence surfaced.
While insider trades can drastically influence prices, they are infrequent and not central to everyday price discovery. Instead, market accuracy relies predominantly on repeat traders who consistently outperform, rather than sporadic bets from less informed participants. Thus, the study refutes the notion that prediction markets thrive due to crowds, instead attributing their success to those with access to information.