A new Columbia University study reveals that much of Polymarket’s explosive growth may have been fueled by wash trading, raising doubts about the authenticity of activity in blockchain-based prediction markets.
A recent study from Columbia University has raised serious concerns about the integrity of trading activity on Polymarket, one of the world’s largest decentralized prediction platforms. The 80-page report, titled “Network-Based Detection of Wash-Trading,” found that up to 60% of Polymarket’s total trading volume during mid-2024 may have been artificially generated through wash trading — a form of manipulation where traders buy and sell the same asset to simulate demand.
Study Uncovers Manipulative Activity
The Columbia research team analyzed transaction data on Polymarket between 2023 and 2025 and discovered extensive artificial trading patterns. According to the report, wash trades accounted for nearly 60% of Polymarket’s total trading volume in July 2024, and persisted into early 2025 before subsiding.
“This activity persisted through late April 2025 before subsiding substantially, and once again increased to about 20% of volume in early October 2025,” the researchers wrote.
Over a three-year period, the study estimated that 25% of all Polymarket volume stemmed from non-organic trading activity.
Co-author Professor Yash Kanoria commented, “I’m hopeful that Polymarket will welcome the analysis in our paper.” He noted that the exchange’s structure may have inadvertently encouraged wash trading, leading to inflated market data.
Wash Trading and Its Broader Implications
Wash trading, which is illegal in the United States, manipulates price discovery by creating a false sense of liquidity and investor demand. While common in early crypto exchanges, decentralized platforms were thought to be less vulnerable — a notion this study directly challenges.
In 2023, a Solidus Labs report found that nearly 70% of Ethereum-based decentralized exchange pools exhibited signs of wash trading, highlighting that manipulation remains widespread even in on-chain environments.
“These findings reinforce the need for greater transparency in decentralized prediction markets,” said a blockchain analytics expert. “Without oversight, artificial volume can distort sentiment and mislead participants.”
Concerns for Prediction Market Growth
The allegations come at a critical moment for Polymarket, which gained traction during the 2024 U.S. presidential election for its accuracy in forecasting political outcomes. The platform was reportedly eyeing a $10 billion valuation amid strong user growth and a planned U.S. market re-entry after the CFTC’s no-action letter in late 2025.
However, the revelation that a significant share of its activity may be non-organic could tarnish its reputation among institutional investors and regulators.
The study underscores a growing concern that prediction markets, while innovative, may be vulnerable to the same market manipulation issues that plagued early crypto trading platforms.
The Columbia report may prompt renewed scrutiny from regulators and investors alike — challenging the perception of transparency in decentralized markets and forcing platforms like Polymarket to strengthen their anti-manipulation safeguards.
Disclaimer
This content is for informational purposes only and does not constitute financial, investment, or legal advice. Cryptocurrency trading involves risk and may result in financial loss.