A peer-reviewed study published Sunday in the Journal of Finance concludes that just 3% of active prediction-market traders account for the entirety of the price-discovery accuracy that has propelled platforms like Polymarket and Kalshi to mainstream relevance over the past 18 months. The finding, drawn from 14.2 million trades across 18,400 markets between January 2024 and December 2025, sharply revises the popular narrative that prediction-market wisdom emerges from a broad and undifferentiated crowd.
Authored by University of Pennsylvania finance professor Itay Goldstein and MIT economist Catherine Tucker, the paper finds that the top 3% of traders by trading volume — fewer than 4,800 individuals across both platforms — generated 96% of all profitable trades while collectively earning $1.06 billion in net profit. The remaining 97% of users, most of whom traded for entertainment, lost a combined $612 million net of fees.
Implications for Market Design
The findings echo earlier research on financial-market microstructure: prediction markets achieve accuracy because a small group of skilled, well-capitalized traders aggressively arbitrage incorrect prices, not because the median trader is well-informed. The conclusion has direct policy implications for how markets like Kalshi — which is regulated by the CFTC under the designated contract market framework — handle position-limit rules and incentives for sophisticated participants.
"The paper destroys the populist defense of prediction markets," Goldstein said in a statement accompanying the release. "What makes them valuable is the ability of professional traders to deploy sufficient capital. Position limits below $250,000 effectively cap accuracy."
Industry Reactions
Polymarket CEO Shayne Coplan acknowledged the result in a Sunday X post but argued that platform integrity is enhanced rather than diminished by the finding. "If the 3% are doing the work, our job is to make sure they have access to deep, liquid markets," Coplan wrote. Polymarket and Kalshi have collectively booked $112 billion of trading volume since January 2024.
CFTC Chair Caroline Pham, in remarks at a Wharton conference Friday, signalled openness to relaxing position limits for designated contract markets if studies like the Goldstein-Tucker paper continue to show concentrated accuracy. The remarks pushed Kalshi-listed FOMC contracts to compress their bid-ask spreads by 23% on Friday.