Yale study: 3% of top Polymarket traders capture 30% of profits, while 67% of retail traders bear all losses

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Researchers from London Business School and Yale University analyzed over $13.7 billion in trading volume on Polymarket and found that the so-called "wisdom of the crowd" is merely a game for a small group of experts: only 3.14% of accounts dominate most price discovery, and together with market makers, they capture over 30% of the profits; meanwhile, 67% of losing accounts bear all the platform's losses. At the same time, the CFTC filed the first-ever insider trading lawsuit involving event contracts, accusing an active-duty U.S. Army Sergeant Major of placing massive bets to profit over $400,000 before classified military operations were exposed. (Previous coverage: Polymarket insider caught! Israeli soldier used classified intelligence to win six out of six bets, sued after making $150,000) (Background: Can we track the next Polymarket insider trader? Yes, and the barrier to entry is low) The most fascinating selling point of prediction markets is that "millions of people bet collectively, and wisdom naturally emerges"—but this story might have been wrong from the start. A new working paper released by researchers from London Business School (LBS) and Yale University points out directly: the price accuracy of Polymarket comes mostly from a very small group of informed elites, not true crowd wisdom. This conclusion is a direct hit to the entire prediction market narrative. Four scholars—Roberto Gomez-Cram, Yunhan Guo, and Howard Kung (all from LBS), and Theis Ingerslev Jensen (Yale University)—systematically analyzed Polymarket’s complete transaction records from 2023 to 2025 in a working paper titled "Prediction Market Accuracy: Crowd Wisdom or Informed Minority?", released on SSRN on April 20, 2026. The data covers 98,906 events, 210,322 markets, approximately $13.76 billion in trading volume, and 1.72 million accounts. The title of the paper is the answer itself: Does the accuracy of prediction markets come from the wisdom of the crowd or an informed minority? The research results are sobering: only 3.14% of accounts can be classified as "expert winners"—accounts whose order flow consistently predicts short-term price fluctuations and final outcomes. This group, combined with market makers, accounts for less than 3.5% of total accounts but captures over 30% of all profits on the platform. On the other end, losing accounts, categorized by the research team as "unlucky or unskilled," make up 67% of the total, and this group bears all the net losses on the platform. The remaining accounts fall in between, essentially breaking even. In other words, the operating logic of Polymarket is more like a mechanism where a few informed individuals harvest the majority of retail investors, rather than an information aggregation platform as defined in textbooks. Even more concerning is the paper's systematic flagging of suspected insider trading accounts. The research team identified 1,950 accounts with specific behavioral patterns: they were opened shortly before a single major event and went dormant immediately after the event settled. The price-moving power of these accounts was about 7 to 12 times that of typical skilled traders—but because they were highly concentrated on isolated events, they did not significantly improve Polymarket's overall prediction accuracy. One specific case study in the paper is particularly striking: three accounts were opened between December 27, 2024, and January 3, 2025, and subsequently focused on betting on the "Yes" contract for "Will Venezuelan President Nicolás Maduro step down before January 31, 2026?" These accounts held heavy positions before the U.S. military operation intelligence was exposed, ultimately profiting over $630,000 in total. The research team noted in the paper that such account behavior exhibits clear characteristics of information asymmetry—precise betting, perfect timing, and disappearing after the fact. Shortly after the paper was released, real-world judicial proceedings provided stunning corroboration for the academic analysis. On Thursday, April 24, 2026, the U.S. Commodity Futures Trading Commission (CFTC) officially filed the first-ever insider trading lawsuit involving event contracts. The defendant is Gannon Ken Van Dyke, an active-duty U.S. Army Sergeant Major based in North Carolina. In a press release, the CFTC stated that before classified intelligence regarding the U.S. military operation codenamed "Operation Absolute Resolve" against Maduro-related targets was exposed, Van Dyke purchased over 436,000 "Yes" contracts for "Maduro to step down before January 31, 2026" on Polym

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