A recent study by Columbia University researchers has uncovered that approximately 25% of all transactions on the prediction market platform Polymarket over the past three years were inflated by wash trading, a practice where traders repeatedly buy and sell the same assets to artificially boost volume metrics. The research, led by Columbia Business School professor Yash Kanoria, analyzed market categories and found the highest manipulation in sports markets at 45% of all-time volume, followed by 17% in election markets, 12% in politics, and only 3% in crypto-related markets.
Despite the findings, the study clarified that Polymarket was not directly responsible for the manipulation, though its structure may have enabled it. A Polymarket spokesperson stated the company is reviewing the results and declined further comment. Professor Kanoria expressed hope that the platform would use the analysis to distinguish authentic from inauthentic volume, noting that wash trading doesn't add liquidity or information to the market.
This revelation comes amid Polymarket's record growth, with over 477,000 active traders in October—a 48% monthly increase—and trading volume surging past $3 billion, more than double September's figures. The spike followed announcements of the upcoming POLY token launch and airdrop, along with plans to re-enter the U.S. market after previous regulatory issues, including a $1.4 million penalty from the CFTC for offering unregistered binary options.
The prediction market sector as a whole is booming, with rival platform Kalshi also reporting record volumes, exceeding $4.4 billion in October. Polymarket's recent funding rounds, totaling $205 million between 2024 and 2025, have valued the firm at $1.2 billion, highlighting the industry's rapid expansion despite concerns over market integrity.
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