In a striking revelation reported by Bloomberg, a new study from Columbia University has found that a significant portion of trading activity on Polymarket, one of the world’s most popular prediction markets, may not be as organic as it seems. According to the researchers, as much as 25% of Polymarket’s total trading volume over the past three years is the result of “wash trading”—a form of artificial trading where users repeatedly buy and sell the same contracts to inflate market activity.
What Is Wash Trading?
Wash trading refers to a manipulative trading practice in which the same trader, or group of colluding traders, buys and sells identical contracts in quick succession. The goal is not to make a profit but to create a false impression of liquidity and demand, misleading other market participants about the true level of activity or interest in a particular market.
In traditional financial systems, wash trading is illegal and closely monitored by regulators. However, in the world of decentralized finance (DeFi) and blockchain-based platforms like Polymarket, the lack of centralized oversight makes it far harder to detect and prevent.
The Columbia Findings
The Columbia research team analyzed on-chain data from Polymarket spanning the last three years. Their findings revealed a consistent pattern of artificial trading loops—users buying and selling the same prediction contracts within minutes or even seconds.
The researchers estimated that roughly one in every four trades on Polymarket fits the profile of wash trading, suggesting that the platform’s overall activity has been significantly overstated. While this doesn’t necessarily mean that Polymarket itself has engaged in manipulation, it raises concerns about how much of the market’s liquidity and activity is genuine.
Why It Matters for Prediction Markets
Prediction markets like Polymarket rely heavily on user trust. They’re designed to reflect the collective intelligence of traders—aggregating real-time bets on outcomes like elections, sports events, and global affairs to produce crowd-sourced probabilities.
If a substantial portion of the trading volume is artificial, the accuracy and credibility of those predictions could be compromised. Inflated activity might attract new users under false pretenses, distort market odds, and reduce the reliability of “wisdom of the crowd” forecasting that prediction markets are built upon.
Polymarket’s Position and Broader Implications
As of now, Polymarket has not issued an official statement in response to the Columbia study. The platform, known for its high-profile markets—ranging from U.S. elections to cryptocurrency price predictions—has often emphasized transparency and on-chain data accessibility as proof of its legitimacy.
However, this report comes at a sensitive time for the platform. Regulatory scrutiny of decentralized platforms is increasing globally, especially as prediction markets blur the lines between betting, speculation, and financial trading.
If regulators interpret the findings as evidence of systemic manipulation, platforms like Polymarket could face new compliance challenges or demands for tighter anti-manipulation controls.
The Bigger Picture
Wash trading has long plagued the broader crypto ecosystem—from NFT platforms to decentralized exchanges. This new study underscores that even emerging sectors like prediction markets are not immune to the same pitfalls that have affected other parts of Web3.
As blockchain data analytics become more sophisticated, transparency alone may no longer be enough; platforms will need to pair openness with robust mechanisms for verifying genuine user activity.
The Columbia study ultimately raises a critical question for the future of decentralized prediction markets:
Can they maintain the appearance of open, trustless systems while ensuring that what users see truly reflects reality?
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