Polymarket Facing Rampant Wash Trading Claims in New Fortune Report

Julia Smith

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Julia Smith

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Julia is an experienced editor with a passion for covering a wide variety of beats. She loves all things politics and regularly covers regulatory updates on emerging technology here for Crypto News.

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October 31, 2024

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Concerns over wash trading and potential market manipulation plague the decentralized prediction platform Polymarket, as reported in an October 30 Fortune article, especially amid upcoming U.S. presidential election betting.

Polymarket Faces Wash Trading, Market Manipulation Claims

The Fortune report, published on October 30, highlights findings from Chaos Labs and Inca Digital, which indicate that up to one-third of Polymarket’s presidential trading volume could be tied to wash trading.

The independent investigations suggest that a “significant portion” of the virtual market’s activity may stem from wash trading, a tactic where shares are repeatedly bought and sold to give the impression of higher trading volume.

“Analysts found that Polymarket activity exhibited signs of wash trading, a form of market manipulation where shares are bought and sold, often simultaneously and repeatedly, to create a false impression of volume and activity,” the report states.

The Shayne Coplan-led site has faced serious scrutiny in recent weeks for its presidential betting polls, with Republican nominee Donald Trump leading rival Kamala Harris 64.9% to 35.3% as of Thursday morning.

Concerns about possible market manipulation escalated last week when a user known as Fredi9999m placed more than $20 million in bets on Republican outcomes, leading to skepticism about the accuracy of Polymarket’s results.

In response, Polymarket traced the high-stakes user to France.

“Polymarket’s Terms of Use expressly prohibit market manipulation,” a Polymarket spokesperson told Fortune in a statement. “We strive to provide users with the fairest analysis possible and our transparency allows the market to decide.”

Election Betting Surge Amid Wash Trading Concerns

The allegations of wash trading arise as the election season reaches its peak, with both candidates entering the final stages of their campaigns.

Trump has publicly embraced digital assets throughout his campaign, vowing to remove SEC Chair Gary Gensler and promising crypto-friendly regulations if he takes office.

“We will have regulations, but from now on, the rules will be written by the people who love your industry, not hate your industry,” he told audiences at the Bitcoin 2024 Conference in Nashville over the summer.

Meanwhile, Harris has expressed support for a fair regulatory approach to digital assets, specifically reaching out to Black male voters as part of her platform.

“She will make sure owners of and investors in digital assets benefit from a regulatory framework,” reads an agenda from the Harris campaign.

It also notes, “This ensures that Black men and others who participate in this market are protected.