A working paper analyzing Polymarket trades finds that approximately three percent [1] of accounts generate the bulk of price discovery.
This finding challenges the common belief that prediction markets rely on the "wisdom of the crowd" to achieve accuracy. Instead, it suggests that a small group of highly skilled traders is responsible for the accuracy of the market's prices.
According to the paper, the analysis spanned trades conducted between 2023 and 2025 [2]. The research suggests that the majority of users are not contributing to the discovery of accurate prices—they are instead funding the gains of the skilled minority.
Polymarket is a prediction market platform where users bet on the outcome of various events. The working paper aims to undermine the idea that collective intelligence is the primary driver of these markets.
Because the study is a working paper, the results are not yet final. The data suggests that the market is not a democratic process of information aggregation, but rather a concentrated power of specialized knowledge.
“Approximately three percent of accounts generate the bulk of price discovery.”
The concentration of price discovery among a small percentage of traders indicates that prediction markets may be more similar to traditional financial markets than collective forecasting tools. If the majority of participants are losing money to a small elite, the platform's accuracy is not a result of a collective effort, but a result of the accuracy of a small group of specialists. This shifts the perspective of prediction markets from a democratic information tool to a concentrated financial instrument.
