A new study is challenging one of the biggest ideas behind prediction markets — that the crowd is what makes them smart.
Summary
Researchers say just 3.14% of Polymarket users drive much of the platform’s pricing accuracy.
A tiny group of skilled traders and market makers captured more than 30% of gains.
The study argues prediction markets may reflect the wisdom of an informed minority, not the wisdom of the crowd.
That is a big difference.
Because prediction markets are often sold as crowd intelligence in action.
This paper says the reality may be much narrower.
A Small Group May Be Driving the Market
Researchers looked at every Polymarket transaction from 2023 through 2025.
Huge sample.
1.72 million accounts.
More than 210,000 markets.
Nearly $14 billion in trading volume.
And they found a very small group appeared to drive much of the useful price discovery.
Just over 3% of users.
These traders were not simply profitable.
Researchers said their trading consistently helped predict short-term moves and final outcomes.
That is what made them stand out.
Most Users Are Not Driving Accuracy
One of the study’s sharper findings is that many profitable traders may just have been lucky.
Researchers stress-tested results by randomizing trade directions thousands of times.
A lot of top earners did not hold up.
Many looked less skilled under deeper testing.
Meanwhile, a large share of losing accounts absorbed most of the platform’s losses.
In other words, many users may be funding the gains of a very informed minority.
That is a very different picture from pure crowd wisdom.
Insider Activity Raised Questions Too
The paper also looked at suspicious activity.
Researchers flagged nearly 2,000 accounts that appeared around single events, moved prices aggressively, then disappeared.
Those accounts moved prices far faster per dollar than skilled traders.
But researchers said that activity seemed too isolated to explain Polymarket’s broader accuracy.
Still, it adds another layer to the debate.
What Makes Prediction Markets “Smart”
The big takeaway is not that prediction markets do not work.
It is that they may work for a different reason than many assume.
Not because millions of users collectively create wisdom.
But because a relatively small group of informed participants may anchor prices.
That is a big shift in how people think about these platforms.
Especially as prediction markets draw more regulatory and institutional attention.
Big Picture
The study puts it bluntly.
It may be the wisdom of an informed minority, not the wisdom of the crowd.
And if that is true, understanding who drives these markets may matter as much as the prices themselves.
