A working paper co-authored by researchers at Yale and the London Business School found that a small group of skilled traders captures most profits on Polymarket, a prediction market platform. The study examined two years of trading across 1.72 million accounts and 210,322 markets, finding that roughly 3% of accounts collected 27% of all dollar profits. Its statistical method reran each trader’s history thousands of times to distinguish persistent skill from luck. Theis Jensen, a Yale economist and co-author, expects the share of skilled traders to fall from roughly 3% to below 1% as competition increases. More skilled participation can improve price accuracy because traders compete to correct mispricing, while tighter spreads make arbitrage—profiting from price discrepancies—harder to execute. Julie Hoover, a Bank of America equity analyst, said smaller specialists could retain advantages in niche markets, where Polymarket’s broad contract selection allows deep expertise. Jensen said large institutions generally avoid low-liquidity markets because small orders can reduce their own advantage, leaving room for specialists. More accurate prices may still benefit casual traders by reducing the risk of repeatedly taking the wrong side of a bet. Federal Reserve researchers found that Kalshi’s macroeconomic contracts matched or exceeded standard forecasting benchmarks, with its headline inflation forecast outperforming the Bloomberg consensus. Greater institutional trading also increases transaction-fee revenue for prediction-market platforms and may strengthen their use for hedging, forecasting and market data. The paper’s authors say the edge is likely to become increasingly concentrated among specialized firms, with only the largest and most sophisticated funds potentially able to beat the odds consistently.