Research reveals: Polymarket players take home 30% of profits by winning 3% of the positions—more than 70% of players absorb all losses

Prediction markets have seen explosive growth in recent years, and the industry broadly attributes their remarkably accurate forecasting ability to “the wisdom of the crowd.” However, a recently published academic paper suggests that the platform’s high level of accuracy is actually driven by a very small number of “informed traders,” while the broader crowd does not contribute to prediction accuracy—and instead becomes the source of funds that enables these traders to profit.

30% of the platform’s profits are concentrated in 3% of accounts

This working paper, revised on April 25, was co-authored by scholars from London Business School and Yale University. The research team analyzed all trading records on Polymarket between 2023 and 2025, covering as many as 1.72 million accounts, 210,322 markets, and total trading volume of approximately $13.76 billion. The results show that only 3.14% of accounts are classified as skilled winners (Skilled winners), and they capture more than 30% of the platform’s profits.

To distinguish “luck” from “ability,” the authors constructed a randomized test and found that looking only at book profit and loss is a very poor indicator. As many as 60% of the accounts initially rated as “lucky winners” later turned into losers in subsequent out-of-sample tests. Real trading performance shows high persistence. Among the accounts considered skilled in the initial sample, 44% remain at a high level in the later tests, while as much as 67% of the platform is classified as either unskilled or unlucky losers, fully absorbing the total accumulated losses.

A suspicion of insider trading emerges: a small number of accounts accurately bet for high payouts

In response to the insider trading issue that has drawn intense public attention, the research team flagged 1,950 accounts with highly suspicious characteristics: these accounts are often opened just before a single event occurs, and quickly go dormant after the event ends. Although these accounts do not drive overall prediction accuracy, the magnitude of the price fluctuations they cause is 7 to 12 times that of skilled traders.

The paper also highlights a key case: three accounts opened between December 27 and January 3 made heavy bets that Venezuelan President Nicolás Maduro would step down, before news of the United States taking military action against Venezuela was made public. In the end, the accounts closed their profits for more than $630k. This incident aligns with a recent enforcement action by the U.S. Commodity Futures Trading Commission (CFTC). Last week, a U.S. Special Forces soldier involved in an arrest operation was arrested and charged for allegedly using confidential information to conduct insider trading, netting more than $400k in profit.

Is a prediction market the power of the wisdom of the crowd—or the wisdom of a few informed players?

According to reports, Polymarket is currently actively negotiating a $400 million funding round, with an estimated valuation as high as $15 billion. However, this paper’s conclusion directly challenges the industry’s longstanding marketing narrative. Previously, Kalshi CEO Tarek Mansour emphasized that prediction markets harness “the power of the wisdom of the crowd.” Polymarket CEO Shayne Coplan also claimed in a media interview last year that financial betting is more effective than experts at aggregating information, and praised it as “the most accurate tool currently available to humanity.”

Now, academic data indicates that so-called accuracy comes more from the wisdom of a small number of informed insiders than from the crowd’s collective judgment. Lawmakers in Washington, New York, and California have also introduced bills or executive orders, preparing to take action against participants in insider trading.

U.S. CFTC forecast-market regulation cut sparks market concerns

With prediction markets booming, the platform’s weekly trading volume has reached billions of dollars, effectively becoming a new emerging financial exchange. According to CNN, the number of employees at the U.S. Commodity Futures Trading Commission (CFTC), which regulates the industry, has been reduced by 24%; since Trump took office, the scale has shrunk to a 15-year low. The CFTC is currently conducting an investigation into allegedly suspicious oil futures trades occurring ahead of major policy changes on Iran announced by Trump. Faced with growing concerns about insider trading, strict regulation is urgently needed to address the financial risks that may arise in prediction markets lacking robust oversight.

(Insider trading? Shorting crude oil fourteen minutes before Trump’s “negotiation statement,” traders net $630k)

This article reveals: Polymarket’s 3% of players take 30% of profits, and more than 70% of players absorb all the losses; first appearing on Lian News ABMedia.