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Columbia study finds large share of Polymarket volume driven by wash trading
A new analysis from Columbia University researchers reveals that a substantial portion of Polymarket trading activity over the past three years was artificially boosted by wash trading. The research, led by Columbia Business School professor Yash Kanoria, estimates that roughly one in four transactions on the prediction market platform were wash trades that inflated reported trading volume.
Scope and breakdown of manipulation
The study quantified wash trading across market categories, showing the highest incidence in sports markets and the lowest in crypto-related markets. Key findings include:
- About 25% of total transactions on Polymarket were wash trades.
- Sports markets accounted for approximately 45% of all-time volume attributed to wash trading.
- Election markets saw around 17% of volume affected.
- Politics markets had roughly 12% of volume linked to manipulation.
- Crypto-related markets were minimally affected, with about 3% linked to wash trading.
Platform responsibility and response
The researchers emphasize that Polymarket itself was not directly implicated in executing these manipulative trades, although platform design and features may have enabled bad actors to carry out wash trading. A Polymarket spokesperson confirmed the company is reviewing the study but declined further comment.
Growth, token launch and market context
The report arrives as Polymarket experiences record growth in users and trading volume. In October the platform reported more than 477,000 active traders, a 48% month-on-month rise, and total trading volume exceeded 3 billion dollars, more than double September’s figure. That surge followed the announcement of the POLY token, an associated airdrop, and plans for U.S. market re-entry after earlier regulatory constraints from the Commodity Futures Trading Commission.
Sector-wide surge in prediction markets
Polymarket’s momentum mirrors a broader boom across prediction markets and speculative trading. Competitors such as Kalshi recorded over 4.4 billion dollars in trading during the same period, signaling strong investor interest in event-driven markets. For traders and investors following blockchain and crypto markets, the Columbia study underscores the importance of monitoring market manipulation risks like wash trading and considering venue transparency when assessing trading volume and liquidity.
What this means for crypto and blockchain participants
For crypto-native users, the study offers reassurance that crypto-related Polymarket markets experienced relatively little manipulation, but it also highlights systemic vulnerabilities in prediction market design. Exchanges, decentralized platforms, and regulators will likely pay closer attention to volume inflation and market integrity as token launches and U.S. re-entry plans progress.
Source: crypto
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