{"id":62519,"date":"2025-11-07T08:56:24","date_gmt":"2025-11-07T08:56:24","guid":{"rendered":"https:\/\/crowdfundjunction.com\/blog\/wash-trading-accounts-for-a-quarter-of-polymarkets-activity-columbia-study-reveals\/"},"modified":"2025-11-07T08:56:24","modified_gmt":"2025-11-07T08:56:24","slug":"wash-trading-accounts-for-a-quarter-of-polymarkets-activity-columbia-study-reveals","status":"publish","type":"post","link":"https:\/\/crowdfundjunction.com\/blog\/wash-trading-accounts-for-a-quarter-of-polymarkets-activity-columbia-study-reveals\/","title":{"rendered":"Wash trading accounts for a quarter of Polymarket\u2019s activity, Columbia study reveals"},"content":{"rendered":"<p><b>(Originally posted on : CoinJournal: Latest Crypto News, Altcoin News and Cryptocurrency Comparison )<\/b><br \/>\n<\/p>\n<div data-site=\"CoinJournal\">\n<div class=\"-mt-16  mb-8  lg:-mt-20  rounded-md  shadow-md\">\n<div class=\"relative  z-10  post-article-image  rounded  overflow-hidden\" data-site=\"CoinJournal\">\n<picture><source srcset=\"https:\/\/coinjournal.net\/wp-content\/uploads\/imagecache\/2025\/11\/20251107_1328_Polymarket-Activity-Study_simple_compose_01k9en3fh3fv1rkqvrc7k7r2d7-smartcrop-750x375.webp\" type=\"image\/webp\" media=\"(min-width: 750px)\"\/><source srcset=\"https:\/\/coinjournal.net\/wp-content\/uploads\/imagecache\/2025\/11\/20251107_1328_Polymarket-Activity-Study_simple_compose_01k9en3fh3fv1rkqvrc7k7r2d7-smartcrop-363x181.webp\" type=\"image\/webp\"\/><source srcset=\"https:\/\/coinjournal.net\/wp-content\/uploads\/imagecache\/2025\/11\/20251107_1328_Polymarket-Activity-Study_simple_compose_01k9en3fh3fv1rkqvrc7k7r2d7-smartcrop-750x375.png\" type=\"image\/jpeg\" media=\"(min-width: 750px)\"\/><source srcset=\"https:\/\/coinjournal.net\/wp-content\/uploads\/imagecache\/2025\/11\/20251107_1328_Polymarket-Activity-Study_simple_compose_01k9en3fh3fv1rkqvrc7k7r2d7-smartcrop-363x181.png\" type=\"image\/jpeg\"\/>\n<\/picture>                            <\/div>\n<\/p><\/div>\n<ul>\n<li data-start=\"314\" data-end=\"395\">About 14% of wallets showed behaviour consistent with coordinated wash trading.<\/li>\n<li data-start=\"314\" data-end=\"395\">Artificial trading peaked at 60% in December 2023 and dropped to 5% by May.<\/li>\n<li data-start=\"314\" data-end=\"395\">ICE plans to invest up to $2 billion as Polymarket prepares for a regulated US return.<\/li>\n<\/ul>\n<p data-start=\"216\" data-end=\"694\">A <a href=\"https:\/\/papers.ssrn.com\/sol3\/papers.cfm?abstract_id=5714122\">new study<\/a> by Columbia University researchers has found that nearly a quarter of all trading on Polymarket, one of the world\u2019s leading decentralised prediction platforms, has been artificially inflated by wash trading over the past three years.<\/p>\n<p data-start=\"216\" data-end=\"694\">Using blockchain analytics, the researchers traced millions of transactions on the Polygon network and found widespread patterns of self-dealing that misrepresented market depth and liquidity.<\/p>\n<p data-start=\"216\" data-end=\"694\">The findings challenge the perceived transparency of blockchain-based prediction markets and raise deeper questions about how decentralised finance can preserve integrity while operating without traditional oversight mechanisms.<\/p>\n<h2 data-start=\"696\" data-end=\"750\">Algorithmic analysis exposes trading manipulation<\/h2>\n<p data-start=\"752\" data-end=\"1254\">The research team analysed millions of wallet transactions recorded on the Polygon blockchain, where all Polymarket activity is publicly verifiable.<\/p>\n<p data-start=\"752\" data-end=\"1254\">By designing algorithms to detect repetitive and circular trading patterns, they identified that 14% of the platform\u2019s 1.26 million wallets exhibited behaviour consistent with wash trading.<\/p>\n<p data-start=\"752\" data-end=\"1254\">These accounts repeatedly transacted with each other but rarely interacted with the wider market, indicating self-dealing activity rather than genuine speculation.<\/p>\n<p data-start=\"1256\" data-end=\"1698\">According to the study, wash trading accounted for an average of 25% of total Polymarket transactions since 2021.<\/p>\n<p data-start=\"1256\" data-end=\"1698\">The frequency of this artificial activity fluctuated over time, peaking at 60% in December 2023 before declining to around 5% in May, only to climb again to roughly 20% by October.<\/p>\n<p data-start=\"1256\" data-end=\"1698\">The findings illustrate how easily decentralised markets can be manipulated when transaction costs are negligible and identities pseudonymous.<\/p>\n<p data-start=\"1700\" data-end=\"2054\">The authors, including Columbia Business School professors Yash Kanoria and Hongyao Ma, economist Rajiv Sethi of Barnard College, and doctoral student Allen Sirolly, emphasised that their estimates are not definitive.<\/p>\n<p data-start=\"1700\" data-end=\"2054\">However, the data suggests a consistent pattern that raises questions about how on-chain markets represent real sentiment and liquidity.<\/p>\n<h2 data-start=\"2056\" data-end=\"2115\">Token speculation may have fuelled artificial activity<\/h2>\n<p data-start=\"2117\" data-end=\"2459\">While the study did not allege direct involvement by Polymarket itself, it identified structural features that make wash trading possible.<\/p>\n<p data-start=\"2117\" data-end=\"2459\">The exchange charges no transaction fees, supports self-custodied crypto wallets, and enables stablecoin settlements, allowing traders to operate multiple pseudonymous accounts without meaningful cost.<\/p>\n<p data-start=\"2461\" data-end=\"2899\">The researchers also linked several spikes in artificial volume to rumours of a potential Polymarket token launch.<\/p>\n<p data-start=\"2461\" data-end=\"2899\">In decentralised finance, such speculation can drive traders to inflate their activity in hopes of qualifying for \u201cairdrop\u201d rewards when a new token is released.<\/p>\n<p data-start=\"2461\" data-end=\"2899\">In early October, Polymarket founder Shayne Coplan <a href=\"https:\/\/x.com\/shayne_coplan\/status\/1975994093529690405\">posted on social media<\/a> hinting at a possible token, coinciding with one of the sharp rises in wash trading.<\/p>\n<p data-start=\"2901\" data-end=\"3232\">Sirolly noted that authentic trading volumes tended to surge around real-world developments like election polls or sports results, whereas wash trading peaks aligned more closely with token-related rumours.<\/p>\n<p data-start=\"2901\" data-end=\"3232\">This suggests that some users were trading not for market insight but for eligibility in prospective reward distributions.<\/p>\n<h2 data-start=\"3234\" data-end=\"3282\">Regulatory context and industry competition<\/h2>\n<p data-start=\"3284\" data-end=\"3597\">Polymarket, founded in 2020, has become one of the most active blockchain-based prediction platforms, allowing users to bet on political, financial, and cultural outcomes.<\/p>\n<p data-start=\"3284\" data-end=\"3597\">Its closest competitor, Kalshi Inc., operates under US regulation but does not run on a blockchain, limiting external scrutiny of its data.<\/p>\n<p data-start=\"3599\" data-end=\"4036\">The report\u2019s timing is significant. In 2022, Polymarket reached a $1.4 million settlement with the Commodity Futures Trading Commission (CFTC) for operating an unregistered exchange and subsequently barred US users.<\/p>\n<p data-start=\"4038\" data-end=\"4359\">Despite regulatory pressure, Polymarket remains attractive to institutional investors.<\/p>\n<p data-start=\"4038\" data-end=\"4359\">Intercontinental Exchange Inc., owner of the New York Stock Exchange, recently signalled plans to invest up to $2 billion in the company, underscoring the mainstream financial world\u2019s growing interest in blockchain prediction markets.<\/p>\n<div class=\"post-meta\">\n<hr class=\"mb-6\"\/>\n<h6 class=\"text-3xl  mb-4  text-green-300\">Share this article<\/h6>\n<hr class=\"mb-6\"\/>\n<h6 class=\"text-3xl  mb-4  text-green-300\">Categories<\/h6>\n<hr class=\"mb-6\"\/>\n<h6 class=\"text-3xl  mb-4  text-green-300\">Tags<\/h6>\n<\/p><\/div>\n<\/p><\/div>\n<p><a href=\"https:\/\/coinjournal.net\/news\/wash-trading-accounts-for-a-quarter-of-polymarkets-activity-columbia-study-reveals\/\">Source link <\/a><br \/>\n<br \/><\/p>\n","protected":false},"excerpt":{"rendered":"<p>(Originally posted on : CoinJournal: Latest Crypto News, Altcoin News and Cryptocurrency Comparison ) About 14% of wallets showed behaviour consistent with coordinated wash trading. Artificial trading peaked at 60% in December 2023 and dropped to 5% by May. ICE plans to invest up to $2 billion as Polymarket prepares for a regulated US return. [&hellip;]<\/p>\n","protected":false},"author":3947362361,"featured_media":62520,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"om_disable_all_campaigns":false,"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0},"categories":[35],"tags":[],"_links":{"self":[{"href":"https:\/\/crowdfundjunction.com\/blog\/wp-json\/wp\/v2\/posts\/62519"}],"collection":[{"href":"https:\/\/crowdfundjunction.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/crowdfundjunction.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/crowdfundjunction.com\/blog\/wp-json\/wp\/v2\/users\/3947362361"}],"replies":[{"embeddable":true,"href":"https:\/\/crowdfundjunction.com\/blog\/wp-json\/wp\/v2\/comments?post=62519"}],"version-history":[{"count":0,"href":"https:\/\/crowdfundjunction.com\/blog\/wp-json\/wp\/v2\/posts\/62519\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/crowdfundjunction.com\/blog\/wp-json\/wp\/v2\/media\/62520"}],"wp:attachment":[{"href":"https:\/\/crowdfundjunction.com\/blog\/wp-json\/wp\/v2\/media?parent=62519"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/crowdfundjunction.com\/blog\/wp-json\/wp\/v2\/categories?post=62519"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/crowdfundjunction.com\/blog\/wp-json\/wp\/v2\/tags?post=62519"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}