Polymarket traders: 3% of accounts capture 27% of profits

An academic working paper co-authored by researchers from Yale and the London Business School reveals that a small group of highly skilled traders dominates profits on the prediction market platform Polymarket. Analyzing $13.76 billion in trades across 1.72 million accounts, the study found that approximately 3% of accounts captured 27% of all dollar profits.

These skilled traders achieved consistent returns by reacting rapidly to public news, exploiting inconsistent pricing across related contracts, and capitalizing on behavioral errors. However, researchers note that as Wall Street and larger institutions enter these markets, the available edge is shrinking. Increased competition leads to faster price adjustments and tighter spreads, making simple arbitrage and mispricing opportunities harder to find.

Yale economist Theis Jensen predicts the proportion of traders with a persistent edge could drop from 3% to below 1% as markets become more efficient. While large institutions may struggle with liquidity constraints in smaller markets, Bank of America analyst Julie Hoover suggests that niche specialists may still find opportunities in low-liquidity contracts where large-scale institutional orders would be too disruptive.