About 25% of all trading volume on Polymarket, one of the world’s largest forecasting platforms, could be wash trades, according to a study published Thursday by researchers at Columbia University.
The paper is I looked into it Polymarket transaction history identified suspicious patterns in 14% of 1.26 million active wallets. Researchers said these patterns indicate that the same users may be inflating their activity and buying and selling to each other to qualify for potential crypto token rewards.
“There are several institutional features that enable large-scale wash trading and potentially provide financial incentives. First, Polymarket does not implement know-your-customer (KYC) verification, making it easy for users to anonymously generate and trade multiple wallet addresses,” the authors write.
“Second, as of this writing, Polymarket does not charge transaction fees, which makes wash trading easier to achieve than exchanges that do. Third, the anticipation of a potential token launch (a new cryptocurrency distributed to users) encourages so-called airdrop farming.”
Allen Shiroley, one of the report’s authors, said: decryption “We do not know (or claim to know) the motive for wash transactions at Polymarket, but it is likely related to airdrop farming,” the team said.
“Wash trading does not require large amounts of capital as the funds are recycled across multiple trades. There is no evidence that exchanges are involved in any way,” he said.
The Colombian team estimated that suspicious transactions peaked at nearly 60% of weekly trading volume in December 2024, fell to less than 5% by May 2025, and then jumped again to around 20% by October. In total, approximately $4.5 billion worth of transactions could be classified as wash transactions.
decryption I have reached out to Polymarket multiple times for comment.
Polymarket has become one of the most successful crypto apps of the past decade by allowing users to bet on political, cultural, and economic outcomes. According to Dune data, it has handled more than $18 billion in total trading volume and attracted 1.3 million users. Its founder, 27-year-old Shane Coplan, became The youngest self-made billionaire this year valued his company at $9 billion after receiving a $2 billion investment from Intercontinental Exchange.
However, the rise of polymarkets is overshadowed by regulatory issues. The company has so far prohibited Or it has been blacklisted for operating without a gambling license in several countries, including Romania last week and France last year. In 2022, the company was fined by the U.S. Commodity Futures Trading Commission (CFTC) and was effectively forced to move overseas. In July, Polymarket acquired the derivatives exchange with a no-action letter from the CFTC, allowing it to operate on a limited basis in the United States.
Wash trading (when traders buy and sell the same asset to create the illusion of activity) is illegal in regulated markets because it distorts price and volume indicators. Previous research has found that “more than 70% of reported trade volume” on unregulated exchanges can be wash trades, and the authors suggest that this may be due to an attempt to game the exchange’s rankings.
In polymarkets, wash trading varied widely from market to market. “45% of historical trade volume in sports markets is classified as likely wash trades by our algorithm, compared to 17% in election markets, 12% in political markets, and 3% in crypto markets.At our peak, we estimated that it would reach 95% in election markets during the week of March 24, 2025, and 90% in sports markets during the week of October 21, 2024.” Study.
The researchers used algorithmic clustering to identify thousands of wallets that traded almost exclusively with each other, some making tens of thousands of round-trip transactions with minimal profit or loss. “The ability to detect wash trades is critical to the long-term health and growth of the market,” they said.
The authors warned that wash trading undermines confidence in prediction markets that rely on honest volumes as a signal of collective intelligence.
“If the exchanges themselves find our methodology useful, they could apply it and perhaps exclude the wallets involved from token issuance or trading privileges,” Shiroly added.
