New research suggests that Polymarket, the crypto-based platform that lets users bet large sums of money on political races, is awash with a particular kind of market manipulation: wash trading.
Wash trading, according to Investopedia, is the practice by which traders buy and sell the same stock nearly simultaneously. Essentially, wash trading simulates that a trade has taken place when, in fact, it hasn’t. This can artificially inflate the prominence or trade volume of a particular stock, making it appear more popular than it actually is. In traditional finance, wash trading is illegal; however, in the world of “decentralized” (read: deregulated) finance, theoretically, anything goes!
Fortune reports that Chaos Labs researchers found that wash trading “constituted around one-third of trading volume on Polymarket’s presidential market,” while Inca Digital found that a “significant portion of the [trade] volume” on the market “could be attributed to potential wash trading.”
In essence, the researchers are accusing the platform of allowing the trade volume on its presidential market to be artificially inflated. The claims are interesting, if vague. So far, neither Chaos Labs nor Inca Digital have publicly released their research findings in the form of a written report, having shared the research exclusively with Fortune. As such, it’s somewhat difficult to understand whether they’re truly onto something or not.
That said, they’re not the first to question whether the platform is fostering misconduct. Polymarket was recently forced to conduct an investigation into some of its biggest bettors after Bloomberg questioned whether a small number of accounts, all of which were unabashedly pro-Trump, were controlled by the same person or group. Polymarket later revealed that four of its biggest betting accounts were all run by one French national.
Gizmodo reached out to Polymarket for comment on the latest research, as well as to the two research firms to request the full reports.
Bets on the U.S. presidential election are Polymarket’s most popular offering and, for months, the consensus on the site has been that Trump will retake the White House. Currently, Polymarket’s page for the White House race shows that 65 percent of users believe Trump will win the presidency. Polymarket has been cited heavily in media coverage of the U.S. presidential election—which is ironic since the site does nothing to measure U.S. sentiment. Or, at least, it’s not supposed to. Americans have been barred from betting with the platform since 2022, due to an agreement with the Commodity Futures Trading Commission.
However, Polymarket’s defenses against American participation are quite weak. Bloomberg has noted that the platform’s “system for blocking US users can be circumvented by using virtual private networks, and social media is full of instructions on how to do it.”
