Yale Study Reveals Top Polymarket Traders Claim Most Profits

Only a tiny fraction of Polymarket traders are taking the bulk of the platform's earnings, according to a fresh academic paper. Around 3% of accounts were responsible for 27% of all dollar-denominated profits, and increasing competition from Wall Street is now reducing that advantage.

The research paper, produced by scholars from Yale and the London Business School, analyzed Polymarket activity over a two-year period. The dataset encompassed 1.72 million accounts and 210,322 markets.

Why Polymarket Traders' Edge Is Shrinking

To differentiate genuine ability from chance, the researchers applied a statistical method that simulates each trader's history thousands of times.

Theis Jensen, a Yale economist and co-author of the study, anticipates that the proportion of skilled traders will decline from roughly 3% to under 1% as competition intensifies.

He noted that heightened competition leads to improved pricing accuracy.

"If you have a lot of skilled people, then they compete, and in doing so, they make prices more correct."

Jensen, Yale School of Management

Julie Hoover, a Bank of America equity analyst, observed that narrower spreads make it more difficult to identify mispriced assets. She suggested that smaller specialists might still maintain an advantage in niche markets. She also pointed out that the platform's broad array of contracts enables specialists to cultivate deep, focused expertise.

Jensen further remarked that large institutions typically steer clear of low-liquidity markets. Small trades in such environments can undermine an institution's own advantage, creating opportunities for specialists.

A Fairer Gamble for Everyone Else

Traders who lack a sustained advantage could still gain from more precise pricing. Greater accuracy lowers the likelihood of consistently backing the losing side of a bad wager.

Federal Reserve researchers discovered that Kalshi's macroeconomic contracts matched or exceeded standard forecasting benchmarks. Its headline inflation forecast even surpassed the Bloomberg consensus.

Rising institutional participation also boosts transaction fee revenue for prediction market platforms. More accurately calibrated prices can enhance their usefulness as tools for hedging, forecasting, and market analysis.

As institutional capital continues to pour in, the advantage is expected to become even more concentrated among specialized firms. The paper's authors contend that only the largest and most sophisticated funds may be able to consistently outperform the market.