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 new research from Columbia University.
In a paper published Thursday analyzing more than two years of on-chain 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 is generally frowned upon in the cryptocurrency space, although it remains common, especially where identities can be hidden.
The study’s findings suggest that fake transaction volume peaked at nearly 60% of weekly volume in December 2024 and remained an ongoing problem until October 2025. Sports and election markets were the most affected. Within a few weeks, more than 90% of transactions 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 they primarily trade other wallets that exhibit the same patterns.
The researchers said this method allowed them to identify not only simple round-trip transactions, but also complex networks of wallets that form loops or trading groups, some of which involve 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 prices below a penny, and almost all of it was flagged as probable laundering.
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 transactions. The study also found evidence that users repurpose capital by transferring USDC across multiple wallets, suggesting even more coordinated efforts. Despite these activities, the document notes that many of the trading wallets suspected of being laundered made no real profits, highlighting that the goal may have been to take advantage of future incentives such as token airdrops or platform rankings, rather than financial return.
Polymarket, which allows users to bet on binary outcomes using the USDC stablecoin, requires no identity verification and does not charge trading fees, features that researchers say can make it especially vulnerable to wash trading. The study also points to speculation about a possible future token as a possible incentive for volume manipulation.
Polymarket has previously been accused of manipulation, particularly in politically sensitive markets such as the US 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 think the manipulation narrative is an attempt by the traditional media to discredit these markets, which threatens their ability to control the narrative,” he told CoinDesk last year.
Still, the Columbia team maintains that inflated volume can distort users’ perceptions of market sentiment. They propose using network-based algorithms to detect suspicious trading patterns and restore trust in these emerging financial tools.
Polymarket did not respond to a request for comment by press time. The company is in the midst of a formal return to the US, having previously reached an agreement 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.
