Polymarket, one of the largest blockchain-based prediction markets, may have seen its trading activity significantly inflated by a practice known as wash trading, according to a new study from Columbia University.
In a paper published Thursday analyzing more than two years of onchain data, 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 the cryptocurrency space, although it remains common, particularly where identities may be hidden.
The study results suggest that the volume of fake trades peaked at nearly 60% of weekly volume in December 2024 and remained a persistent problem until October 2025. The sports and election markets were most affected. Within weeks, more than 90% of transactions in these categories appeared inauthentic.
The researchers said they developed a new algorithm to detect fictitious trades based on wallet behavior, focusing on how often users quickly open and then close positions, particularly when trading primarily with other wallets exhibiting the same patterns.
The researchers said this method allowed them to identify not only simple back-and-forth trades, but also complex networks of wallets forming trading loops or clusters, some involving tens of thousands of accounts. An identified group of more than 43,000 wallets was responsible for nearly $1 million in trading volume, mostly at sub-penny prices, with almost all flagged as likely wash trades.
In some cases, traders appeared to move contracts across dozens of wallets in rapid succession, sometimes even holding losing positions to make the trades appear legitimate. The study also found evidence that users reuse their capital by moving USDC across multiple wallets, further suggesting coordinated efforts. Despite these activities, the paper notes that many of the suspected wash trading wallets did not make any actual profits, highlighting that the goal could have been to game future incentives such as token airdrops or platform rankings, rather than generate financial returns.
Polymarket, which allows users to bet on binary outcomes using the stablecoin USDC, does not require identity verification and charges no trading fees, features that researchers say could make it particularly vulnerable to wash trading. The study also highlights speculation on a potential future token as a possible incentive for volume manipulation.
Polymarket has previously been accused of manipulation, particularly in politically sensitive markets like the US presidential election. But not everyone buys into this narrative. Harry Crane, a statistics professor at Rutgers, argued that concerns about manipulation might be exaggerated or even politically motivated.
“I think the narrative about manipulation is an attempt by mainstream media to discredit these markets, which threatens their ability to control the narrative,” he told CoinDesk last year.
Still, the Columbia team says inflated volume can distort users’ perception 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 as of press time. The company is in the process of officially returning to the United States, having previously settled its charges with American 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.
