Etymology
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smart money (n.)

"money bet by those in the know," 1926, from smart (adj.). The same phrase earlier meant "money paid to sailors, soldiers, workers, etc., who have been disabled while on the job" (1690s), from a noun derivative of smart (v.). Also "money paid to obtain the discharge of a recruit" (1760), hence "money paid to escape some unpleasant situation" (1818). Sometimes in legal use, "damages in excess of injury done."

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Definitions of smart money

smart money (n.)
money bet or invested by experienced gamblers or investors (especially if they have inside information);
smart money (n.)
(law) compensation in excess of actual damages (a form of punishment awarded in cases of malicious or willful misconduct);
Synonyms: punitive damages / exemplary damages
smart money (n.)
people who are highly experienced or who have inside information;
the smart money said Truman would lose the election
From wordnet.princeton.edu