Study: Polymarket's trading volume has been inflated by wash trading, accounting for an average of 25% of all buying and selling over the past three years
The volume of activity on Polymarket, one of the most popular prediction markets, has been significantly inflated by so-called wash trading …
Context & Ripple Effects
This study extends the 2024 finding that Polymarket activity showed signs of wash trading, putting a multi-year estimate on how much reported buying and selling may not reflect independent demand.
The integrity question sits alongside later evidence of suspicious profits tied to patterns consistent with nonpublic information and highly concentrated trader returns, making volume quality—not just headline activity—a central measure of the platform's market credibility.
First-order effects
- Polymarket's reported trading volume becomes a less reliable proxy for genuine liquidity and user participation if roughly one-quarter of transactions were wash trades.
- Traders, counterparties, and observers have a stronger reason to discount gross-volume metrics when assessing how readily positions can be entered or exited.
Second-order effects
- Competing prediction-market operators face greater pressure to demonstrate trade surveillance and distinguish verified activity from raw volume; later reporting that Kalshi flagged hundreds of suspicious trades illustrates the direction of that operational burden.
- Rankings, growth narratives, and partnership decisions built around transaction volume may shift toward metrics such as active traders, repeat participation, and trade quality.
Third-order effects
- If recurring manipulation findings persist, prediction markets will need a more explicit market-integrity stack—monitoring, enforcement, and credible reporting—to convert activity into durable trust.
- The sector's competition may increasingly turn on verifiable liquidity rather than the largest displayed volume, particularly as platform growth and legitimacy become intertwined.
The trend: Prediction markets are moving from growth measured by reported volume toward competition over auditable liquidity and market integrity.