Research published by Columbia University suggests that the rapid growth of the prediction market Polymarket may be significantly inflated by artificial trading activity, rather than purely organic expansion.
A detailed 80-page paper, titled “Network-Based Detection of Wash-Trading” and currently awaiting peer review, outlines the findings of Columbia researchers. They identified extensive wash-trading activity on Polymarket that commenced in July 2024. During that month, the study found that wash trades constituted nearly 60% of the platform’s total trading volume.
This artificial trading pattern persisted through late April 2025 before experiencing a substantial decline. The researchers noted a subsequent increase to approximately 20% of the total volume in early October 2025.
Based on their analysis, the researchers concluded that wash trading accounted for 25% of Polymarket’s total trading volume over the past three years.
Yash Kanoria, a co-author of the paper and a professor at Columbia University, expressed his hope that Polymarket would engage with their findings. The authors of the study allege that Polymarket itself was largely responsible for the wash trading, attributing this to the inherent structure of its operations.
Cointelegraph reached out to Polymarket for a comment regarding these allegations but had not received a response by the time of publication.
Wash trading is a manipulative practice where an individual or entity simultaneously buys and sells the same asset. This creates a deceptive impression of market activity, volume, and demand. In the United States, wash trading is illegal because it is considered a form of market manipulation that can distort prices and mislead investors about a market's genuine liquidity and demand.
Allegations of wash trading are not uncommon within the cryptocurrency industry. In 2023, a report by Solidus Labs highlighted that decentralized exchanges were particularly susceptible to this practice. That report, which analyzed approximately 30,000 Ethereum-based decentralized exchange liquidity pools, found that nearly 70% had engaged in wash trading over a three-year period.
A related development involved a crypto firm pleading guilty to wash trading an FBI-created token.
Wash-Trading Allegations Cast a Shadow on the Rise of Prediction Markets
The recent allegations of wash trading cast a significant shadow over the rapid ascent of Polymarket and the broader sector of blockchain-based prediction markets.
These prediction markets gained considerable prominence during the 2024 US presidential election cycle, largely due to their accurate forecasting of election outcomes. Polymarket's surge in popularity positioned it to potentially achieve a reported $10 billion valuation, fueled by rumors of an impending major funding round.
Polymarket has established itself as a leading decentralized prediction platform, enabling users to place bets on real-world events without the need for a central bookmaker.
As recently reported, Polymarket has been preparing for a re-entry into the US market in November. This move comes just months after the Commodity Futures Trading Commission (CFTC) issued a no-action letter to a clearinghouse that Polymarket had acquired.
In related news, traders on platforms like Kalshi and Polymarket have been placing bets on the possibility of the Supreme Court curbing the tariff powers of former President Trump.