- Two crypto research firms have accused Polymarket of performing wash trades around election odds.
- Fortune claimed that Chaos Labs revealed a distinction between Polymarket's on-chain transaction volume and its published transaction volume.
- Chaos Labs concluded that one-third of the platform's trading volumes are likely wash trades.
In a Wednesday report, crypto research firms Chaos Labs and Inca Digital revealed that prediction market Polymarket is guilty of performing wash trading on its presidential election market just a few days before the US presidential election.
Polymarket accused of election wash trading
With the presidential election less than a week away, blockchain-based prediction marketplace Polymarket has received increased attention and is becoming a major reference point across online communities.
However, crypto analysis firms Chaos Labs and Inca Digital have raised concerns regarding the platform's trading volumes, suggesting that wash trading is responsible for most of its election market odds.
A report by Fortune Crypto revealed that the firms found evidence of rampant market manipulation on the platform, especially in the presidential election market.
Wash trading is a form of market manipulation where the same trader buys and sells an asset to create the illusion of high trading volume.
In this case, Chaos Labs unveiled through on-chain analysis that approximately one-third of the trading volume in Polymarket's presidential market was due to wash trading. Inca Digital also noted that many trades appeared suspicious. This practice misleads investors by inflating perceived market activity and can distort prices.
Inca Digital also revealed a distinction between Polymarket's on-chain transaction volume and the platform's published volumes.
Polymarket reported that its users had placed bets of up to $2.7 billion regarding the outcome of the presidential elections. In contrast, on-chain activity shows that an actual $1.75 billion is what has been realized, Inca Digital told Fortune.
Currently, the odds on Polymarket's presidential election market have Donald Trump up 66% against Kamala Harris' 34%.
The findings by Chaos Labs and Inca Digital have resulted in users questioning the authenticity and credibility of Polymarket.
Some highlighted Polymarket's airdrop speculation as a potential reason for the alleged wash trading on the platform.
Need to see the report first but general first thoughts: 1) ye wash trading is generally prevalent in crypto - only question is how big is it here, 2) polymarket airdrop speculations certainly add to wash trading https://t.co/OkwOZyTZR4
— Kris (@CryptoQuantKris) October 30, 2024
Polymarket has yet to respond to the accusations as of the time of writing.
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