A quarter of polymarket volume could consist of wash trading, according to research from Columbia

About 25% of all trading volume on Polymarket, one of the world’s largest forecasting platforms, could be wash trading, according to a study published Thursday by researchers at Columbia University.

The paper, that investigated Polymarket’s trading history identified suspicious patterns in 14% of the 1.26 million active wallets. Researchers said these patterns indicate that the same users may be buying and selling among themselves to inflate activity and qualify for potential crypto token rewards.

“There are several institutional features that together enable and potentially provide an economic incentive for large-scale laundry trading. First, Polymarket does not implement Know-Your-Customer (KYC) authentication, making it easy for a user to anonymously generate and trade multiple wallet addresses,” the authors wrote.

“Second, at the time of writing, Polymarket does not charge transaction fees, making wash trading more feasible than on exchanges that do. Third, anticipation of a potential token launch – a new cryptocurrency distributed to users – encourages so-called airdrop farming.”

Allen Sirolly, one of the report’s authors Declutter that the team “does not know (or claim to know) what is motivating the wash trade on Polymarket, but that it may be related to airdrop farming.”

“Wash trading does not require large amounts of capital because capital is recycled over multiple trades. We have no evidence that the exchange is involved in any way,” he said.

The Columbia team estimated that suspicious transactions peaked at nearly 60% of weekly volume in December 2024, fell to less than 5% by May 2025, and then rose again to around 20% in October. In total, approximately $4.5 billion worth of transactions could be classified as probable wash transactions.

Declutter contacted Polymarket several times for comment.

Polymarket has become one of the most successful crypto apps of the decade by letting users bet on political, cultural and economic outcomes. According to Dune data, it has processed a total trading volume of more than $18 billion and attracted 1.3 million users. The founder, 27-year-old Shayne Coplan, became the youngest self-made billionaire this year, following a $2 billion investment from Intercontinental Exchange, valuing the company at $9 billion.

Yet Polymarket’s rise has been overshadowed by regulatory issues. The company is gone forbidden or blacklisted in several countries for operating without gambling licenses, including Romania last week and France last year. The company was fined by the US Commodity Futures Trading Commission (CFTC) in 2022, effectively forcing it abroad. In July, Polymarket acquired a derivatives exchange along with a CFTC no-action letter, allowing limited operations in the United States.

Wash trading – where traders buy and sell the same assets to create the illusion of activity – is illegal in regulated markets because it distorts prices and volume statistics. Previous studies have shown that “more than 70% of the reported volume” of unregulated exchanges may be wash trading, which the authors say could be due to attempts to determine the rankings of gaming exchanges.

At Polymarket, the laundry trade varied greatly per market. “A full 45% of all-time volume in the sports markets is classified as likely wash trading by our algorithm, compared to 17% in the election markets, 12% in the political markets and 3% in the crypto markets. At their peaks, our estimates reached as high as 95% in the election markets for the week of March 24, 2025, and 90% in the sports markets for the week of October 21, 2024,” the study said.

Researchers used algorithmic clustering to identify thousands of wallets that traded almost exclusively with each other, some executing tens of thousands of back-and-forth transactions with minimal profit or loss. “The ability to detect wash trading is important for the long-term health and growth of the market,” they said.

The authors warned that wash trading undermines confidence in prediction markets, which rely on fair volume as a signal of collective intelligence.

“The exchange itself could adopt our methodology if they find it useful, and perhaps exclude affected wallets from token issuance or trading privileges,” Sirolly added.