Up to 60% of Polymarket Volume Is Wash Trading
An 80-page SSRN paper by Columbia University researchers finds that wash trading may account for up to 60% of Polymarket’s trading volume between July 2024 and April 2025. The study estimates wash trades represent 25% of the platform’s total three-year volume and notes a rebound to around 20% by October 2025. Researchers blame Polymarket’s operational structure for enabling manipulative self-trades and collusion without net position changes. As a leading decentralized prediction market preparing a US relaunch after a no-action letter from the CFTC, Polymarket faces possible regulatory scrutiny, damaged market integrity, and eroded trader confidence. Traders should monitor wash trading risks, liquidity shifts, and platform trust amid transparency concerns in blockchain-based prediction markets.
Bearish
The study’s findings undermine Polymarket’s reported volume metrics and signal deeper transparency issues in decentralized prediction markets. In the short term, revelations of extensive wash trading could prompt a decline in trading activity and platform use, as traders question data reliability and shift funds elsewhere. Regulatory scrutiny may intensify, leading to caution among institutional participants. Over the long term, persistent integrity concerns could erode trust in Polymarket’s market and similar prediction platforms, dampening growth and innovation. Together, these factors suggest a bearish outlook for Polymarket’s trading volume and token demand.