Polymarket’s Trading Volume May Be 25% Fake, Columbia Study Finds

Polymarket, one of the largest blockchain-based prediction markets, may have had its trading activity significantly inflated by a practice known as wash trading, according to new research from Columbia University.

In a paper published Thursday analyzing more than two years of onchain data, the researchers estimate that nearly 25% of the platform’s historical volume involved users rapidly buying and selling contracts — often to themselves or with colluding accounts — to inflate activity metrics without changing their net market position.

Wash trading is illegal in traditional financial markets and generally frowned upon in crypto, though it remains common, especially where identities can be hidden.

The study’s findings suggest the volume of fake trades peaked at nearly 60% of weekly volume in December 2024 and has remained an ongoing issue through October 2025. Sports and election markets were the most affected. In some weeks, over 90% of trades in those categories appeared inauthentic.

The researchers said they developed a novel algorithm to detect wash trading based on wallet behavior, focusing on how often users open and then quickly close positions, especially when trading primarily with other wallets that exhibit the same patterns.

The researchers said this method allowed them to identify not just simple back-and-forth trades, but also complex networks of wallets forming trading loops or clusters, some involving tens of thousands of accounts. One identified cluster of over 43,000 wallets was responsible for nearly $1 million in trading volume, mostly at prices under a penny, with nearly all of it flagged as likely wash trading.

In some cases, traders appeared to pass contracts through dozens of wallets in rapid succession, sometimes even holding losing positions to give the appearance of legitimate trades. The study also found evidence of users reusing capital by transferring USDC across multiple wallets, further suggesting coordinated efforts. Despite these activities, the paper notes that many of the suspected wash trading wallets made no real profits, highlighting that the goal may have been to game future incentives like token airdrops or platform rankings, rather than financial return.

Polymarket, which allows users to bet on binary outcomes using the USDC stablecoin, does not require identity verification and charges no trading fees, features the researchers argue may make it especially vulnerable to wash trading. The study also points to speculation over a potential future token as a possible incentive for volume manipulation.

Polymarket has previously been accused of manipulation, particularly around politically sensitive markets like the U.S. presidential election. But not everyone buys the narrative. Harry Crane, a statistics professor at Rutgers, has argued that concerns about manipulation may be overblown, or even politically motivated.

“I believe the narrative about manipulation is an attempt by legacy media to discredit these markets, which threatens their ability to control the narrative,” he told CoinDesk last year.

Still, the Columbia team argues that inflated volume can distort users’ perceptions of market sentiment. They propose using network-based algorithms to flag suspicious trading patterns and restore trust in these emerging financial tools.

Polymarket did not return a request for comment by press time. The company is in the middle of a formal return to the U.S., after previously settling charges with U.S. regulators. As part of this process, the company will issue a token, its chief marketing officer said last month. At the same time, Polymarket is reportedly looking to raise funds at an up-to-$15 billion valuation.