Polymarket’s $2.59B Peak Volume Includes 25% Artificial Trades, Report Shows

A new study from Columbia University has found that nearly 25% of Polymarket’s trading activity was artificial, revealing how easily decentralized prediction platforms can inflate their reported liquidity. Researchers examined millions of Polygon blockchain transactions, identifying repetitive self-dealing that exaggerated market depth without contributing to real trading volume. These findings challenge assumptions about transparency in blockchain-based prediction markets.

Wash Trading Raises New Questions for Prediction Markets

According to the study, about 14% of wallets displayed coordinated wash trading behavior, conducting circular trades that rarely engaged with other market participants. Artificial trading peaked at 60% in December 2023 before falling to 5% by May, later climbing again to nearly 20% in October. Despite these patterns, the authors clarified that there is no evidence Polymarket orchestrated wrongdoing, instead pointing to the market’s structural incentives—zero transaction fees and pseudonymous accounts—as key enablers.

The research attributes part of this activity to token speculation and airdrop expectations, which have historically fueled inflated metrics across decentralized finance. Analysts noted that spikes in artificial volume often coincided with rumors surrounding a possible Polymarket token launch. Founder Shayne Coplan’s recent social media hints reportedly aligned with one of the study’s identified surges in wash trading, reinforcing the link between speculation and volume distortions.

Polymarket's Market Position and Regulatory Scrutiny

Still, Polymarket remains one of the most active blockchain-based prediction markets, reaching $2.59 billion in trading volume in October and raising $205 million in funding between 2024 and 2025 at a valuation of $1.2 billion. The platform also maintains high forecasting accuracy, with independent trackers citing results above 95% for closed events. However, the study’s authors argue that high accuracy does not offset the risks of distorted liquidity data, which could mislead traders and investors.

Regulators are paying close attention. The CFTC previously fined Polymarket $1.4 million and restricted U.S. user access, underscoring ongoing oversight concerns. Meanwhile, Intercontinental Exchange Inc.—parent of the NYSE—has announced plans to invest up to $2 billion in the company, highlighting how traditional finance continues to embrace blockchain prediction models despite integrity risks.