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

Why It Matters

Artificially inflated volume can distort perceived market sentiment, eroding user trust and potentially prompting tighter regulatory oversight of crypto‑based prediction markets, while highlighting the need for stronger anti‑wash‑trading controls.

Summary

Columbia University researchers estimate that roughly 25% of Polymarket’s historical trading volume is likely wash‑trading, with weekly fake volume peaking at about 60% in December 2024 and exceeding 90% in election and sports markets during certain weeks. Using a novel algorithm that tracks rapid position openings and closures, the team uncovered coordinated networks—including a cluster of over 43,000 wallets responsible for nearly $1 million of suspect trades—suggesting the activity is designed to game future incentives such as token airdrops rather than generate profit. Polymarket, which operates without identity verification and charges no fees, has not commented as it prepares a token launch amid ongoing regulatory scrutiny.