"The "artificial trading," as the authors call it, varied over time but accounted for an average of 25% of all buying and selling on Polymarket over the past three years, the researchers concluded."
"Advocates promote these markets as an efficient, crowd-sourced barometer of the truth, with odds derived from the traders betting on different outcomes. If some of that volume is "fictitious," the study says, it could alter the understanding Polymarket's relative strength in the industry and also undermine the notion that prediction markets reflect the "wisdom of a larger crowd.""
""I'm hopeful that Polymarket will welcome the analysis in our paper," Yash Kanoria, a professor at Columbia University's business school, and one of the paper's four co-authors, said in an email. "Wash trading doesn't add liquidity or information to the market, so it would seem valuable to distinguish authentic from inauthentic volume.""
Polymarket experienced substantial wash trading that averaged roughly 25% of all buying and selling over the past three years. The artificial trading fluctuated over time and did not contribute genuine liquidity or information to markets. Elements of the exchange's crypto-based structure make rapid buy-and-sell behavior possible, although there is no direct claim that the platform itself executed the wash trades. Inflated volume can misrepresent the platform's relative strength in the industry and can undermine the ability of prediction markets to reflect the wisdom of a larger crowd. Polymarket indicated it was reviewing the findings.
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