According to a new academic study, about 3% of users on the Polymarket platform account for 27% of all profits. The study, conducted by researchers from Yale University and the London Business School, analyzed 1.72 million accounts and 210,322 markets over two years of trading on the platform.
The authors of the study applied statistical methods to reanalyze the trading history of each participant to separate skill from luck. Theis Jensen, an economist from Yale and co-author of the study, suggests that the share of experienced traders on the platform may decrease from the current 3% to less than 1% amid increasing market competition. He noted that having many qualified participants enhances pricing accuracy: "If you have a lot of experienced people, they compete, and in the process, they make prices more accurate." Experts believe that growing competition among traders will help make the market more efficient and less prone to errors.
Increased competition improves pricing, leading to a lower likelihood of less experienced traders landing on the wrong side of an unfavorable bet. Bank of America analyst Julie Hoover added that narrower spreads make it more challenging to find mispriced assets. She also noted that specialized traders can still have advantages in niche segments of the market where large institutional investors typically avoid competition due to low liquidity. As institutional investment volumes increase, the advantage is likely to concentrate among specialized firms, and the largest and most complex funds may regularly outmaneuver the odds. Improved pricing and increased trading volumes will be crucial factors for platforms offering predictive markets.
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