A new academic paper finds that Polymarket’s price discovery is driven by a tiny, highly skilled minority rather than the wisdom of the crowd.
Researchers from London Business School and Yale analyzed every Polymarket transaction from 2023–2025 — covering 1.72 million accounts, 210,322 markets and roughly $13.76 billion in trading volume. Their headline finding: only 3.14% of accounts qualified as “skilled winners,” meaning their order flow reliably predicted short-term price moves and final market outcomes.
Those skilled traders, together with market makers, captured more than 30% of the platform’s gains while representing under 3.5% of all accounts. The authors argue this pattern points to “the wisdom of an informed minority, not the wisdom of the crowd.”
The paper also separates skill from luck. To test whether raw profits signaled genuine ability, researchers ran a permutation test that randomly flipped buy and sell directions 10,000 times across past trades. The result: just 12% of top earners overlapped with the statistically identified skilled group, and about 60% of traders who looked like “lucky winners” lost their edge in out-of-sample tests. Conversely, 67% of accounts labeled as unlucky or unskilled absorbed the platform’s losses — a challenge to the idea that prediction markets simply aggregate broad public wisdom.
The team flagged potential insider trading as well: 1,950 accounts opened shortly before a single event and then went dormant afterward. Per-dollar, those accounts moved prices 7–12 times more than skilled traders. Still, the researchers concluded this event-specific activity was too narrow to explain Polymarket’s overall accuracy.
The paper arrives as prediction markets face growing regulatory and legislative scrutiny. Polymarket itself has been reported to be in talks to raise $400 million at a $15 billion valuation. The authors’ takeaway — that accuracy comes from an “informed minority” — contradicts CEO Shayne Coplan’s description of the platform as “the most accurate thing we have as mankind right now,” and raises fresh questions about how much of Polymarket’s signal is driven by a small, potentially privileged subset of users.
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