A recent study by Columbia University researchers has revealed that a significant portion of Polymarket’s trading activity has been inflated by artificial wash trading. This practice involves the same trader repeatedly buying and selling assets to artificially boost volume metrics. The findings were initially reported by Bloomberg.

According to the study, nearly one in four transactions on Polymarket over the past three years can be attributed to wash trading. The analysis, led by Columbia Business School professor Yash Kanoria and his team, examined the extent of wash trading across different market categories on the platform. Their results showed that 45% of all-time volume in sports markets, 17% in election markets, 12% in politics markets, and 3% in crypto-related markets were influenced by wash trading.

Despite these findings, the researchers emphasized that Polymarket itself was not directly responsible for the manipulation, although the platform may have enabled such activities. A spokesperson for Polymarket stated that the company is currently reviewing the study’s findings but declined to provide further comments at this time.

This revelation comes as Polymarket is experiencing its strongest growth phase to date, marked by record numbers of active traders and soaring trading volumes. In October alone, the platform attracted over 477,000 active traders—a 48% increase from the previous month. Total trading volume also surged past $3 billion, more than double September’s figures.

The surge in activity followed the announcement of Polymarket’s POLY token and an accompanying airdrop, as well as plans to re-enter the U.S. market after previously facing regulatory restrictions imposed by the Commodity Futures Trading Commission (CFTC).

As the prediction market sector continues to boom with platforms like Polymarket and Kalshi hitting new highs, the Columbia University study serves as a timely reminder of the challenges posed by wash trading and the importance of regulatory oversight in this rapidly growing space.
https://crypto.news/polymarket-volume-inflated-by-wash-trading-columbia-study-finds/