Wisdom of the Crowd? Don’t Bet on it on Prediction Markets.

Posted on: April 27, 2026, 11:55h. 

Last updated on: April 27, 2026, 11:55h.

Todd Shriber @etfgodfather Read More

Expertise: Financial, Gaming Business, Mergers and Acquisitions.

• Just 3% of Polymarket traders account for the bulk of accuracy on the platform, according to a new study
• The rest of the traders aren’t providing accuracy, but they’re funding it, says study
• “Unlucky losers” makeup significant majority of Polymarket traders

Prediction markets, such as Kalshi and Polymarket, lean into the “wisdom of the crowd” — a form of collectivism implying that when large numbers of market participants express a particular viewpoint, that perspective can and often is validated.

Data tell a different story. A working paper recently published by researchers at the London Business School and Yale University indicates that it’s just 3.14% of Polymarket traders accounting for nearly all of the accuracy and credible price discovery on the platform. The researchers analyzed 1.72 million Polymarket accounts and $13.76 billion in trading activity spanning 2023 to 2025 to arrive at the conclusion that “skilled winners” dominate accuracy on Polymarket.

Using this test, we classify “takers”, that is, accounts that primarily submit market orders, into four groups based on the significance and direction of their profits,” according to the paper. “Skilled winners, who earn significant profits, make up 3.14% of Polymarket accounts. Lucky winners, who earn insignificant profits, make up 29.0%. Unlucky losers, who incur insignificant losses, make up 61.4%. Unskilled losers, who incur significant losses, make up 6.4%. The remaining 0.1% are market makers, who provide liquidity by posting limit orders.”

Polymarket, which until recently was the the world’s largest prediction market by volume, is a relevant testing ground for this type of study because it settles trades on a public blockchain, meaning researchers can easily access data confirming traders’ success or lack thereof.

Polymarket Success Tough to Come By

Though it’s analyzing a different theme, the London Business School/Yale study jibes with previous research confirming that the vast majority of prediction market traders will not find sustainable, long-term success.

In the London Business School/Yale study, one point is clear: skilled winners on Polymarket hold some predictive power while the other groups are merely providing liquidity.

“Skilled traders’ order imbalance is a strong predictor of both next-period price changes and final market outcomes,” say the researchers. “Lucky winners, despite their positive profits, have no significant predictive power. Unskilled losers consistently trade against the eventual outcome, while market makers accommodate order flow in the short run but end up on the wrong side of informed trades at resolution, earning profits from liquidity provision rather than directional skill.”

Skill Must Be Separated from Luck

Some retail traders use copy-trading technology to generate profits on prediction markets, but that’s a risky gambit because as the London Business School/Yale team notes, a few lucky trades by a particular wallet inflates profits while providing no evidence of the trader’s actual skill.

In other words, skill must be separated from luck and that’s instructive in prediction markets because on Polymarket, market makers and skilled takers represent just 3.5% of all accounts but command 30% of the profits.

“Prediction market accuracy thus reflects the wisdom of an informed minority, not the wisdom of the crowd,” according to the study.