Up To 25% Of Polymarket Trading Volume May Be Wash Trading, Columbia University Study Says

Core Insights - A significant portion of Polymarket's trading activity is reportedly fabricated, with nearly 25% of its volume over the past three years identified as wash trading according to Columbia University researchers [2][4]. Trading Activity Analysis - The study indicates that approximately 14% of the 1.26 million wallets that have engaged in trading on Polymarket were flagged for suspicious activity, suggesting a pattern of repeated buying and selling without actual market position changes [3]. - Wash trading volume on Polymarket reached a peak of 60% of total trading volume in December 2024, subsequently dropping to less than 5% in May, before rebounding to around 20% last month [4]. Market-Specific Findings - The research highlights that sports markets on Polymarket are particularly affected by wash trading, with 45% of historical volume flagged, peaking at 90% during the week starting October 21, 2024 [5]. - In contrast, only 17% of the total volume in Polymarket's election markets is estimated to be wash trading, although this figure spiked to 95% during the week beginning March 25 [6]. Platform Vulnerabilities - The researchers noted that Polymarket's structure, including the absence of transaction fees and the pseudonymous nature of blockchain technology, makes it especially vulnerable to wash trading activities [4]. - The motivation behind the wash trading is speculated to be users attempting to exploit the platform's planned airdrop, which was confirmed by Polymarket's Chief Marketing Officer [6][7].