Prediction market accuracy is driven by a tiny 3% of expert traders while the other 97% of participants just provide the money for them to win.
April 25, 2026
Original Paper
Prediction Market Accuracy: Crowd Wisdom or Informed Minority?
SSRN · 6617059
The Takeaway
The wisdom of the crowd is a myth in the world of betting and forecasting markets. These platforms do not aggregate the collective knowledge of many people. Instead, they act as a filter that allows a handful of informed specialists to extract profit from everyone else. The majority of participants are not adding information but are simply providing the liquidity that experts need to function. Accuracy comes from elite individuals, not the group as a whole. Understanding this shift changes how we should interpret market signals and the value of democratic participation.
From the abstract
Prediction markets are remarkably accurate, yet the source of this accuracy remains poorly understood. The conventional view attributes it to crowd wisdom, whereby prices aggregate information from a large and diverse pool of participants. We show instead that accuracy is driven by a small minority of informed traders. Using the universe of transactions from a large prediction market platform, we identify these traders and show that they, around 3% of all accounts, generate the bulk of price dis