Study Finds One-Quarter of Polymarket Trading May Be Artificial
The researchers don’t suggest Polymarket itself is responsible for the “artificial” trading; rather they believe users are doing it partly to maximise any future airdrops.
The researchers said they hope Polymarket tries to reduce the level of wash trading as fake volume doesn’t add liquidity or information for the market.
As much as 25% of the total trading volume on the popular blockchain-based prediction market, Polymarket, may be “fictitious” wash trades, according to a paper published last Thursday by researchers at Columbia University in New York.
Wash trading is a financial market transaction that doesn’t involve a true change in market position. Common examples include trading between accounts that both have the same beneficial owner, or repeated buying and selling between colluding accounts within the bid/ask spread.
As part of the study, the researchers created algorithms to identify wash trading on Polymarket by accessing the publicly available transaction data stored on the Polygon blockchain. The researchers stress that their findings are not definitive, but rather are estimates of the levels of wash trading. Other prediction markets that don’t run on blockchains, such as Kalshi, could not be analysed in this way since their transaction data is not public.
One of the study’s co-authors, Yash Kanoria, a professor at Columbia University’s business school, told Bloomberg he’s “hopeful that Polymarket will welcome the analysis in our paper.”
Wash trading doesn’t add liquidity or information to the market, so it would seem valuable to distinguish authentic from inauthentic volume.
The level of wash trading the researchers identified on Polymarket varied over time:
On average over the past it accounts for about 25% of total volume.
Wash trading peaked at 60% in December of 2024 and dropped to a low of 5% in May of 2025. By October this year it had risen again to around 20%.
Around 14% of wallets using Polymarket were flagged by researchers as potentially engaging in wash trading. The researchers don’t suggest in their paper that Polymarket itself is responsible for the wash trading, but they do say that the platform’s crypto foundations may make it more prone to this kind of misuse.
On unregulated exchanges that use stablecoins or other cryptocurrencies as means of payment, this problem becomes especially acute, as the real-world identities of individual wallet owners are not observed, despite the fact that all transactions between wallets are on-chain.
The authors suggest the recent surge in wash trading starting in early October may be related to Polymarket’s planned $POLY token, which is expected to be airdropped to users in proportion to how much they use the platform. By engaging in wash trading, users may be trying to maximise the size of their airdrop while minimising risks.
One of the researchers, doctoral student Allen Sirolly, told Bloomberg that “peaks in organic trading and authentic volume are linked to news about the referenced events, but peaks in wash trading are more likely to be linked to rumors about token issue.”
Whatever the underlying cause, the finding of such high levels of wash trading on Polymarket is potentially a problem for the platform. It could undermine its claim of being able to harness the ‘wisdom of crowds’ and accurately predict the outcome of a wide variety of events, from sports to politics to pop culture and virtually everything in between.
The paper has yet to undergo peer review. Polymarket hasn’t commented publicly on the study.
Related: Google Integrates Polymarket and Kalshi Data Into Search and Finance Tools
Polymarket’s Legal Troubles
Polymarket has been at the forefront of the emergence of so-called ‘prediction markets’, which allow users to bet on the outcomes of a wide range of events.
The platform hasn’t been without its fair share of trouble, though. In 2022, it was officially banned from operating in the US, after agreeing to a US$1.2 million (AU$1.8 million) settlement with the Commodity Futures Trading Commission (CFTC) for operating an unregistered exchange.
Related: Polymarket Wins CFTC Greenlight to Launch US Platform
In July of this year though, Polymarket’s legal fortunes improved as both the CFTC and the US Department of Justice closed investigations into whether it had continued to allow US customers to use its platform in breach of the settlement.
Polymarket is now looking to return to the US market in a fully regulated fashion following its acquisition earlier this year of the CFTC-regulated exchange, QCX.
Australian regulator ACMA also instructed ISPs to block access to Polymarket in Australia in August 2025 due to the platform breaching Australia’s Interactive Gambling Act (2001).
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Filed under: Bitcoin - @ November 10, 2025 4:16 am