Concerns Over Artificial Trading Exposed in Polymarket Research

Recent research from Columbia University indicates that the prediction market platform Polymarket may have inflated trading activity due to artificial trading practices, particularly wash trading. This raises serious questions about the integrity of trading on the platform.

Key Takeaways

Columbia University researchers found significant wash trading on Polymarket, with nearly 60% of the trading volume attributed to this practice in July 2024.
Over three years, 25% of Polymarket's overall trading volume was linked to artificial trading activities.
Wash trading is a deceptive practice that's illegal in the U.S., as it distorts market perceptions.
Allegations of wash trading are not unique to Polymarket but have been noted across the cryptocurrency industry.
Polymarket has gained notoriety as a decentralized prediction platform but may face challenges and scrutiny due to these findings.

Polymarket rife with ‘artificial trading,’ Columbia University researchers find

Artificial Trading Practices in Polymarket

The prediction market Polymarket, which has seen rapid growth recently, may not have achieved its expansion without the influence of artificial trading activity, according to a new study from Columbia University.

In a comprehensive paper titled “Network-Based Detection of Wash-Trading,” which has yet to undergo peer review, researchers uncovered substantial evidence of wash trading on Polymarket since July 2024. In that month alone, they discovered that wash trades comprised nearly 60% of the platform's total trading volume.

The paper notes, “This activity persisted through late April 2025 before considerably decreasing, only to rise again to about 20% of the volume in early October 2025.” The researchers concluded that a quarter of Polymarket's total trading volume over the past three years was due to these artificial trading activities.

Co-author and Columbia University professor Yash Kanoria expressed hope that Polymarket would be open to the findings presented in their paper. He asserted that the structure of Polymarket's operations may have contributed to the prevalence of wash trading practices.

Cointelegraph sought a response from Polymarket regarding these claims but had not received any comments by the time of publication.
An abstract of “Network-Based Detection of Wash Trading,” published on Thursday. Source:_SSRN

Wash trading—which involves the same trader simultaneously buying and selling the same asset to deceive others about market activity—is illegal in the United States due to its potential to manipulate prices and mislead investors about true market demand and liquidity.

Broader Implications of Wash Trading in Crypto

Concerns about wash trading have surfaced previously in the cryptocurrency sector. A 2023 report by Solidus Labs highlighted that decentralized exchanges were particularly prone to this practice. An analysis of 30,000 liquidity pools on Ethereum-based decentralized exchanges revealed that almost 70% had engaged in wash trading over three years.

The Impact of Allegations on Polymarket's Growth

These recent wash trading allegations cast a shadow over the rapid rise of Polymarket and the entire blockchain-based prediction market industry.

Prediction markets gained significant traction during the 2024 U.S. presidential election as they effectively predicted outcomes, propelling Polymarket’s popularity and positioning it for a potential valuation of $10 billion amidst rumors of a significant funding round.

Emerging as one of the top decentralized prediction platforms, Polymarket allows users to bet on real-world events without the need for a centralized bookmaker.
Polymarket’s monthly active traders. Source:_Dune

Recently, Cointelegraph reported that Polymarket is making plans to re-enter the U.S. market this November, shortly after the Commodity Futures Trading Commission (CFTC) provided a no-action letter to a clearinghouse that the company acquired.