The accuracy of prediction markets is driven by a small group of informed traders: not the collective wisdom of the crowd, according to new research from London Business School and Yale University.
The study found that just 3.5% of accounts on platforms like Polymarket generate the majority of profits. Researchers Roberto Gomez-Cram, Yunhan Guo, Theis Ingerslev Jensen, and Howard Kung analyzed trading data from 2023 to 2025 and published an updated version of their findings on April 25.
To reach their conclusions, the authors ran a large-scale simulation, replicating each trader’s historical activity 10,000 times. This allowed them to estimate how much profit came from skill versus randomness.
Their conclusion is direct: most participants are not improving market accuracy, they are financing it. While the majority generates trading volume, their activity adds little informational value, and their losses effectively transfer to a small, better-informed minority.
Who Actually Makes Money In Prediction Markets
The so-called “informed minority” includes market makers and experienced traders. Together, they account for more than 30% of total profits on the platform. On average, market makers earned around $11,830 per account.
Another group: about 29% of users consists of “lucky winners.” These traders do make profits, but largely due to chance rather than consistent strategy or informational advantage.
The Majority Funds The Market
The remaining participants fall into the category of “unlucky losers,” who collectively account for the market’s total losses. In practical terms, roughly 67% of users end up financing the gains of a small minority.
Prediction markets have rapidly grown in popularity within the crypto industry, with monthly trading volumes exceeding $15 billion. These platforms cover everything from elections and sports to corporate earnings and cultural events.
However, this growth has also raised concerns among regulators. The study highlights that insider trading may be a “particular problem” in prediction markets, as they operate with less oversight than traditional financial systems. Many users trade pseudonymously, and contracts are closely tied to real-world events, making the use of private information difficult to detect.
Independent Data Points To The Same Pattern
Separate research supports these findings. Earlier in April, analyst Andrey Sergeenkov reported that only 0.015% of Polymarket traders earn consistently enough, and at sufficient scale, to treat trading as a primary source of income. His analysis defined this group as those making at least $5,000 in profit over four consecutive months between April 2024 and April 2026.
Together, these studies point to the same conclusion: prediction markets are not driven by collective intelligence, but by a small group with a clear informational edge. The majority contributes liquidity and volume, while consistent profits remain concentrated in very few hands.