- Fortune magazine reported that up to a third of the trading volume on Polymarket, a crypto prediction market, could be inflated by wash trading.
- Two blockchain analytics firms found evidence of potential wash trading on Polymarket, with one concluding around a third of volume and users were likely engaging in wash trades.
- The alleged wash trading may be motivated by traders trying to be eligible for a potential future token airdrop from Polymarket rather than an attempt to manipulate election predictions.
Fortune magazine recently reported that prediction market Polymarket is “rife” with wash trading. This market manipulation involves traders acting as both buyer and seller in the same trades. The allegation comes shortly after separate claims of manipulation related to a “whale” trader emerged.
Fortune’s Reporting on Wash Trading
Fortune cited blockchain analytics firms Chaos Labs and Inca Digital in its reporting. Chaos Labs estimated that around one-third of volume on Polymarket’s presidential market was wash trading. Inca Digital also found a “significant portion” of volume was potentially wash trading. The motivation was speculated to be “airdrop farming” rather than election manipulation.
Response to Fortune’s Claims
Flip Pidot, a prediction market expert, said more information on the research methods was needed to fully evaluate the claims. He disputed Fortune calling Polymarket’s volume calculations an “anomaly.” Nic Carter suggested on social media that airdrop farming was a plausible explanation.
Polymarket’s Fees and Trading
Polymarket does not currently charge trading fees. This enables repetitive buying and selling like wash trading. Polymarket counts each trade as $1 of volume, even if a trader paid pennies per share. This is standard practice for quoting futures market volume.
Contrast With Previous Manipulation Claims
The wash trading claims differ from earlier accusations of a “whale” trader manipulating Trump’s odds. While a few large accounts are controlled by one person, market watchers believe the trading patterns don’t indicate clear manipulation attempts.
Conclusion
The Fortune article has sparked new debate about potential manipulation on Polymarket. But the wash trading claims require more scrutiny before drawing definitive conclusions. The motivations and magnitude remain uncertain. Polymarket will need to address these concerns, especially if it moves forward with issuing a token.
