Columbia Research Exposes Polymarket: Prediction Platform’s Volume Pumped by Wash Trading
Another day, another crypto 'innovation' looking suspiciously like old-school market manipulation.
Polymarket—the self-styled future of prediction markets—just got caught with its hand in the wash-trading cookie jar. Columbia researchers found its eye-popping transaction volumes aren't what they seem.
How it works: Traders artificially inflate activity by simultaneously buying and selling the same contracts. The result? Phantom liquidity that would make a Wall Street prop desk blush.
Why it matters: Real users get screwed when platforms prioritize vanity metrics over actual market integrity. But hey—if the DeFi bros can't beat traditional finance at its own game, they'll just imitate its worst habits.
The bottom line: Wash trading accusations are becoming crypto's version of 'the dog ate my homework.' At this rate, we'll need a blockchain forensics team just to find an honest volume metric.
Key Findings: Artificial Trading Skews Polymarket’s True Activity
The study says that the phenomenon referred to as “artificial trading” has accounted for nearly 25% of all buy and sell transactions on Polymarket over the last three years.
A Polymarket representative told Bloomberg on Friday that the predictions market is reviewing the study and has no immediate comment.
Per the researchers’ algorithm split up, the prevalence of wash trade was found to be 45% of all-time volume in sports markets, 17% in election markets, 12% in politics markets, and 3% in crypto markets.
“I’m hopeful that Polymarket will welcome the analysis in our paper,” Yash Kanoria, a professor at Columbia University’s business school and co-author, told Bloomberg.
“Wash trading doesn’t add liquidity or information to the market, so it WOULD seem valuable to distinguish authentic from inauthentic volume.”
The prediction market hit record highs in October for volume, active traders, and new market launches, led by the native token launch. Polymarket trading volume reached an unprecedented $2.59 billion high in October.
The platform recently announced securing $205 million across two previously undisclosed funding rounds, between 2024 and 2025, valuing the firm at $1.2 billion.
Polymarket Accuracy and Indicators of Credibility
According to independent tracking, Polymarket is more than 95% accurate in the closing hours of a market.
In a detailed analysis, Cryptonews author Eric Huffman notes that Polymarket is legit and legal in many leading markets worldwide.
The platform’s top rival Kalshi, achieved a monthly trading volume record, breaking above $4.39B in October. According to data collected by Dune Analytics, Kalshi and Polymarket saw notional trading volume rise above $2 billion for the first time during the week ending Oct. 19.
In the U.S., the Commodities and Futures Trading Commission (CFTC) labeled Polymarket’s prediction markets as “binary options,” which can only be offered by a registered exchange. This resulted in a $1.4 million civil penalty for Polymarket and forced the platform to restrict access to U.S. users.
