The prediction market's core pitch has long been "wisdom of the crowd"—millions of bets, accurate prices. But a new working paper from London Business School and Yale University shatters that narrative. The study systematically analyzed Polymarket's complete trading records from 2023 to 2025: 98,906 events, 210,322 markets, ~$13.76 billion in volume, and 1.72 million accounts. The finding is stark—only 3.14% of accounts are classified as "skilled winners" (those consistently predicting short-term price moves and final outcomes). Together with market makers (less than 3.5% of accounts), this tiny group captured over 30% of all platform profits. Meanwhile, the 67% of accounts labeled as losers absorbed the entire net losses. The rest roughly broke even.
1,950 Ghost Accounts: Statistical Fingerprints of Insider Trading
More striking is the paper's systematic flagging of suspected insider trading. The researchers identified 1,950 accounts with distinct behavior patterns: opened shortly before a major event, went dormant after settlement. These accounts move prices 7 to 12 times more than typical skilled traders. The paper delves into one case: three accounts opened between Dec 27, 2024 and Jan 3, 2025, concentrated bets on the "Nicolás Maduro to step down by Jan 31, 2026" Yes contract. They piled in before US military operation intelligence leaked, netting over $630,000 in profits. The team notes that pinpoint timing followed by disappearance is classic information asymmetry.
CFTC Strikes: Academic Findings Meet Legal Action
Days after the paper's release, real-world law enforcement provided a startling corroboration. On April 24, 2026, the Commodity Futures Trading Commission (CFTC) filed the first-ever insider trading case involving event contracts, charging active-duty U.S. Army Sergeant Major Gannon Ken Van Dyke. The CFTC alleges that Van Dyke bought over 436,000 shares of the Maduro-step-down Yes contract on Polymarket between Dec 30, 2025 and Jan 2, 2026, before classified intelligence about the "Operation Absolute Resolve" raid was disclosed, netting over $404,000. The CFTC invoked the "Eddie Murphy Rule" (prohibiting trading on non-public government information) for the first time, bringing event contracts under the same insider trading framework as futures. The case, filed in the Southern District of New York, seeks disgorgement, civil fines, and a lifetime trading ban. The $630,000 flagged by academics and the $404,000 targeted by the CFTC both point to the same event window—a clear overlap showing that insider trading in prediction markets is not anecdotal but systematically detectable.
The study deals a direct blow to Polymarket's "wisdom of the crowd" narrative. Market makers and informed accounts form the backbone of price discovery, while retail traders systematically subsidize the pool. Combined with the CFTC's use of the Eddie Murphy Rule—which effectively classifies event contracts as financial instruments, not gambling—Polymarket's path to U.S. compliance is now steeper than ever. The company had previously settled with the CFTC over U.S. access restrictions, paying a $1.4 million fine. Now, with academic evidence of widespread insider activity and a concrete enforcement action, the prediction market's claim of being "more accurate than polls" looks increasingly hollow. When 3% of users take 30% of the money, and 67% lose their entire stake, the business may never have been about crowdsourcing wisdom—it was always about information asymmetry.