A new academic study challenges the idea that prediction markets are accurate because of collective intelligence. Researchers found that just 3.14% of Polymarket accounts, or about 54,000 traders, drove the platform’s accuracy. These skilled traders consistently earned profits and predicted outcomes correctly. The remaining 96% of traders either broke even by luck or lost money.
The working paper, titled “Prediction Market Accuracy: Crowd Wisdom or Informed Minority?” was published on SSRN on April 20, 2026. It was authored by Roberto Gomez-Cram, Yunhan Guo, and Howard Kung of London Business School, and Theis Ingerslev Jensen of Yale University. The researchers analyzed the complete transaction history on Polymarket, which is the world’s largest prediction market by trading volume. The study covered 98,906 events, 210,322 markets, and $13.76 billion in total trading volume across 1.72 million accounts.
How the Study Worked
The authors used a statistical method called a sign-randomization test. They classified traders into groups based on whether their profits reflected genuine skill or random chance. Only a tiny fraction qualified as skilled winners. These traders earned persistent profits that held up out of sample. They traded across an average of 79 markets each and consistently positioned in the direction of final outcomes.
The researchers found that skilled traders’ order flow predicted both next-period price changes and final market outcomes at statistically significant levels. A one-percentage-point increase in skilled net buying corresponded to an 8 basis point increase in the probability of the correct final outcome. Lucky winners, despite posting positive account balances, showed no meaningful predictive power.
Growth and Concentration
Polymarket’s monthly trading volume climbed from $3.3 million in December 2023 to $1.98 billion in December 2025, a nearly 600-fold increase over two years. Active accounts expanded from roughly 1,600 to more than 519,000. Despite that growth, the concentration of skill remained narrow. The study also tested skill persistence. Researchers split events randomly into training and test sets. Among traders classified as skilled in training, 44% retained that classification in the test set. For unskilled losers, 51% remained in that category. By comparison, skilled mutual funds in a parallel test retained their classification only 10% of the time.
Skilled traders also responded first when scheduled news arrived. In tests covering Federal Open Market Committee (FOMC) announcements and corporate earnings releases, only the skilled group shifted its order imbalance in the direction of the news surprise within a narrow window around each release. Other groups showed no consistent response.
Insider Trading and Broader Implications
The paper separately examined insider trading. Researchers identified 1,950 accounts that met timing and conviction criteria, suggesting they traded on non-public information. These accounts averaged roughly $15,000 in profits each and had large price effects when they did trade. One documented case involved three accounts that took positions in a contract tied to Venezuelan President Nicolas Maduro hours before a secret U.S. military operation on Jan. 3, 2026, collectively earning more than $630,000. On April 23, 2026, the CFTC filed a complaint alleging that an active-duty U.S. Army service member engaged in insider trading using one of those accounts. Despite those price effects, the researchers concluded that insider activity was too concentrated in isolated events to account for broad price discovery across the platform.
The majority of participants, the study found, funded accuracy rather than produced it. Unlucky and unskilled losers made up 67% of all accounts and absorbed the entirety of aggregate losses. Market makers and skilled takers together represented fewer than 3.5% of accounts but captured more than 30% of total gains. The authors conclude that prediction market accuracy reflects the behavior of a small, identifiable group of informed traders. Whether those traders continue participating as platforms grow and fees increase remains an open question for future research.
