Study Finds Only 3% of Polymarket Traders Are Skilled, Capturing Over 30% of Gains

Gate News message, April 26 — A new academic paper analyzing Polymarket transactions from 2023 through 2025 concludes that the platform’s accuracy reflects “the wisdom of an informed minority, not the wisdom of the crowd.” The research, revised April 25 by scholars from London Business School and Yale, examined 1.72 million accounts, 210,322 markets, and approximately $13.76 billion in trading volume.

Only 3.14% of accounts qualify as “skilled winners,” whose order flow consistently predicts both short-term price moves and final outcomes. These skilled traders and market makers together capture more than 30% of all gains while representing under 3.5% of accounts. The authors employed a sign-randomization test, running each trader’s history 10,000 times with buy/sell directions randomly flipped; by this benchmark, only 12% of top earners overlap with the skilled group, and roughly 60% of “lucky winners” reverted to losses when tested on separate events. Skilled traders show unusual persistence: 44% classified as skilled in training data remained skilled in separate test samples, compared with approximately 10% in parallel tests on active mutual funds. Meanwhile, 67% of accounts classified as unskilled or unlucky losers absorb the platform’s entire pool of aggregate losses.

Researchers flagged 1,950 accounts opened shortly before isolated events and closed after resolution, suggesting potential insider activity. These accounts moved prices 7 to 12 times more per dollar than skilled traders. A case study identified three accounts opened between December 27 and January 3 that collectively cleared over $630,000 betting on Nicolás Maduro’s ouster before a U.S. military operation was disclosed. This aligns with the Commodity Futures Trading Commission’s first-ever insider trading complaint involving event contracts, filed against U.S. Army Master Sgt. Gannon Ken Van Dyke for trading on classified information ahead of the raid.

The findings arrive as Polymarket reportedly raises $400 million at a $15 billion valuation and lawmakers in Washington, New York, and California introduce bills targeting insider participation in prediction markets. The paper directly challenges industry marketing claims, quoting Kalshi CEO Tarek Mansour on “the wisdom of the crowds” and Polymarket CEO Shayne Coplan’s assertion that financial stakes aggregate information more effectively than experts.