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 coordinated 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, although it is still common, especially where identities can be hidden.
The study’s findings suggest that the volume of fake trades peaked at nearly 60% of weekly volume in December 2024 and has remained an ongoing problem through October 2025. Sports and election markets were the most affected. For some weeks, over 90% of trades in these categories appeared to be fake.
The researchers said they developed a new algorithm to detect wash trading based on wallet behavior, focusing on how often users open and then quickly close positions, especially when they trade 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 that form trading loops or clusters, some involving tens of thousands of accounts. An identified cluster of over 43,000 wallets was responsible for nearly $1 million in trading volume, mostly at prices below a penny, with almost all of it flagged as probable wash trading.
In some cases, traders appeared to send contracts through dozens of wallets in rapid succession, sometimes even with losing positions to give the appearance of legitimate trades. The study also found evidence of users recycling capital by transferring USDC across multiple wallets, further suggesting a coordinated effort. Despite these activities, the paper notes that many of the suspected laundry exchanges did not make any real profit, underscoring that the goal may have been to gamble on future incentives such as token airdrops or platform placements, rather than financial returns.
Polymarket, which allows users to bet on binary outcomes using the USDC stablecoin, does not require identity verification and charges no trading fees, characteristics that the researchers argue could make it particularly 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 such as the US presidential election. But not everyone buys the story. Harry Crane, a statistics professor at Rutgers, has argued that concerns about manipulation may be exaggerated or even politically motivated.
“I think the narrative of 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 new financial tools.
Polymarket did not return a request for comment by press time. The company is in the midst of a formal return to the US after previously settling cases with US 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 a valuation of up to $15 billion.
