How Insider Detection on Prediction Markets Works

When a $200,000 position lands on a Polymarket binary market and resolves YES three days later — was that informed? Lucky? Or was someone watching the news cycle better than everyone else?

This is the question Polyloly's "insider detection" feature tries to answer at scale. Here's exactly how it works, what it can and can't tell you, and how to use the signal without getting fooled.

The basic idea

For every wallet that places a position ≥$1,000 on Polymarket, we look at:

Win rate — what percentage of their resolved markets did they take the winning side on?
Trade count — how many resolved markets total?
Position size pattern — do they consistently bet big, or just occasionally?

A trader with 80%+ win rate on 5+ resolved markets gets a 🔴 INSIDER flag. Between 70-85% with 5+ trades = 🟡 SUSPECT.

That's it. No machine learning, no fancy math. Just statistics applied to public on-chain data.

Why these thresholds?

Random guessing on binary markets gives you 50% win rate over time. So:

80% over 10 markets = roughly p < 0.001 by random chance (extremely unlikely)
80% over 5 markets = p ≈ 0.03 (possible but suspicious)
70% over 5 markets = p ≈ 0.16 (could easily be skill or luck)

We chose the thresholds at the boundary where you can't just shrug it off as "they got lucky." Five trades is the minimum because anyone can hit 5/5 by luck — but 5/5 at $50k positions each is a different story.

What the flag does NOT mean

INSIDER does not mean illegal. It doesn't mean fraud. It doesn't even mean information advantage in the traditional sense. It means: this wallet has performed better than chance allows, and you should look at what they're doing.

Possible explanations for a high win rate:

Genuine information advantage — they know something you don't (insider in the colloquial sense)
Domain expertise — they trade only in markets they deeply understand (e.g., a sports analyst betting on NFL outcomes)
Statistical specialization — they only trade markets with clear edge and pass on uncertain ones
Counterparty exploitation — they spotted markets where retail was wildly mispriced
Lucky streak — pure variance; everyone has them

Polyloly can't distinguish between these. We just surface the signal and let you investigate.

What to actually do with the signal

The "smart money" framework from traditional finance applies here too. When you see a flagged trader take a large position:

Check their other trades. Are they consistently right across diverse markets, or all in one category? Diverse = stronger signal of skill or information.
Look at the market's news cycle. Did relevant news drop right after their entry? That's worth knowing.
Compare with the market's existing price. A flagged trader buying at $0.80 says less than one buying at $0.30 (where they're betting against consensus).
Don't blindly copy. Even insiders are wrong sometimes. Their position is a data point, not a prophecy.

The limits of public data

Polyloly only sees what's on-chain. We can't see:

Off-chain communications between wallets
The same person operating multiple wallets (a sophisticated insider would split positions)
Information asymmetry that doesn't manifest in trades (e.g., fewer trades, more conviction)
Reversed positions across multiple markets (hedging strategies that look like multiple bets)

So the algorithm catches obvious patterns while missing sophisticated ones. A truly clever insider would:

Use 5-10 wallets to dilute the signal
Mix winning bets with deliberate small losing bets to stay under thresholds
Trade through multiple platforms

If you're seeing them on Polyloly, they're either not sophisticated, not trying to hide, or operating at scale where dilution becomes impractical.

Real numbers from the dashboard

As of the latest snapshot, across all of Polymarket:

~5% of active wallets fit the INSIDER threshold (80%+ on 5+ trades)
~12% fit the SUSPECT threshold
The top 10 wallets by win rate × volume averaged 87% win rate on $50k+ positions

That's a meaningfully large group of traders systematically winning. Some of them are genuinely good. Some of them know things. The dashboard is for figuring out which is which.

Where to start

Open the live dashboard and watch the feed for a few minutes. Click on any trade flagged with the 🔴 INSIDER badge. The modal will show you the trader's full history — every market they've traded, every win and loss, the time pattern.

That's where pattern recognition begins. The algorithm just gets you to the right wallets. The interpretation is yours.

About the author

Poly Loly — Prediction Markets Expert

Lead analyst behind Polyloly, a real-time analytics platform tracking whale positions across $1B+ in monthly Polymarket volume. Focus areas: on-chain data aggregation, insider-detection heuristics (80%+ win-rate flags on resolved markets), and market microstructure across political, sports, crypto, and esports prediction markets. Published daily trading-terminal intel, trader leaderboards, and automated alerts via @PolylolyHi.

🌐 polyloly.com · 𝕏 @PolylolyHi · ✉ hi@polyloly.com

This article is for informational purposes only and does not constitute investment advice. Prediction markets carry a risk of capital loss.

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