Study: Polymarket's 3% Skilled Traders Drive Accuracy, Not Crowds

A new academic paper analyzing every Polymarket transaction from 2023 through 2025 concludes that the platform’s accuracy reflects “the wisdom of an informed minority, not the wisdom of the crowd,” according to the working paper revised April 25 by researchers at London Business School and Yale.

Skill Concentration and Trader Distribution

The paper, written by Roberto Gómez-Cram, Yunhan Guo, Howard Kung, and Theis Ingerslev Jensen, examined 1.72 million accounts, 210,322 markets, and roughly $13.76 billion in trading volume.

Just 3.14% of accounts qualify as “skilled winners,” meaning their order flow consistently predicts both short-term price moves and final outcomes. Together with market makers, these skilled traders capture more than 30% of all gains while making up under 3.5% of accounts.

The authors employed a sign-randomization test, re-running each trader’s history 10,000 times with buy/sell directions flipped at random. By that benchmark, raw profit-and-loss is a poor proxy for skill: only 12% of top earners overlap with the skilled group, and roughly 60% of “lucky winners” reverted to losses when tested on a separate sample of events.

Skill Persistence

Skill demonstrates unusual persistence on Polymarket. 44% of accounts classified as skilled in a training sample remained skilled in a held-out sample, compared with about 10% in a parallel test the authors ran on active mutual funds.

The 67% of accounts classified as unlucky or unskilled losers absorb the platform’s entire pool of aggregate losses.

Insider Trading Concerns

The authors flagged 1,950 accounts that opened shortly before a single event and went dormant after it resolved. Those accounts move prices roughly 7 to 12 times more per dollar than skilled traders but are too concentrated in isolated events to drive overall accuracy.

The paper includes a case study of three accounts that opened between December 27 and January 3 and collectively cleared more than $630,000 betting on Maduro’s ouster before the U.S. military operation was disclosed. This episode aligns with the Commodity Futures Trading Commission’s first-ever insider trading complaint involving event contracts, filed against U.S. Army Master Sergeant Gannon Ken Van Dyke for trading on classified information ahead of the raid.

Regulatory and Industry Context

The findings emerge during a sensitive period for prediction markets. Polymarket is reportedly in talks to raise $400 million at a $15 billion valuation. Lawmakers in Washington, New York, and California have introduced bills or executive orders aimed at restricting insider participation in prediction markets.

The paper directly challenges marketing claims standard across the industry. The authors quote Kalshi CEO Tarek Mansour describing prediction markets as harnessing “the power of the wisdom of the crowds,” and reference Polymarket CEO Shayne Coplan telling 60 Minutes that financial stakes aggregate information more effectively than experts. Coplan stated that Polymarket represents “the most accurate thing we have as mankind right now, until someone else creates some sort of a super crystal ball.”