"According to a new paper by researchers at the London Business School and Yale, prediction markets are largely dominated by the top 3.14 percent of users. On a platform like Polymarket, which has a monthly active user base of around 700,000 bettors, this means around just 21,000 highly informed gamblers are coming out ahead."
"These accounts generate most of the trading volume but do not systematically improve price accuracy. Prediction market accuracy thus reflects the wisdom of an informed minority, not the wisdom of crowds."
"Though plenty of people won, only the 3.14 percent of users showed a predictive ability exceeding random chance, allowing them to capture over 30 percent of the available profits."
"The study provides some sound financial advice - that gambling is a sucker's game - but also pokes a huge hole in the so-called 'wisdom of the crowds' narrative, which is the widespread misconception that accurate predictions come from millions of people pooling their knowledge together."
Prediction markets like Kalshi and Polymarket are primarily influenced by a small group of highly skilled traders, constituting only 3.14 percent of users. These traders generate most of the trading volume without improving price accuracy. A study indexed 1.7 million accounts and found that only a minority consistently outperformed random chance, capturing over 30 percent of profits. The majority of bettors are net losers, effectively transferring their funds to this elite group, challenging the notion that collective knowledge leads to accurate predictions.
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