Polymarket, the Election Prediction Market Touted by Nate Silver, Is Plagued by Fake Trading, Researchers Find

Donald Trump currently has a 67% chance of winning according to the platform. But analysts at two crypto research firms have found evidence of rampant wash trading on Polymarket

Analysis by two crypto research firms has revealed evidence of extensive wash trading on Polymarket, despite the platform’s odds being widely shared in both social and mainstream media. Notably, the platform currently indicates a 67% chance of victory for Donald Trump.

In separate investigations conducted by blockchain firms Chaos Labs and Inca Digital and shared exclusively with Fortune, analysts discovered that Polymarket activity exhibited signs of wash trading. This practice involves manipulating the market by buying and selling shares, often simultaneously and repeatedly, to create a false impression of volume and activity.

Chaos Labs found that wash trading constituted approximately one-third of trading volume on Polymarket’s presidential market. Meanwhile, Inca Digital’s report suggests that a “significant portion of the volume” on the market could be attributed to potential wash trading.

Since a pivotal court decision in September legalized electoral betting, several prediction markets, including Kalshi and Robinhood, have been launched in the U.S. However, Polymarket remains the largest platform by far, thanks in part to its crypto-native design and offshore operations. It is worth noting that Polymarket remains inaccessible to U.S. investors.

With less than a week until the U.S. elections, the suspicious activity on Polymarket raises questions about the accuracy of the site, which its 26-year-old founder Shayne Copland has touted can “demystify the real world events that matter most to you.”

A request for comment from Polymarket went unanswered.

The rise of prediction markets

Founded in 2020 and backed by VCs including Founders Fund, Polymarket initially attempted to launch electoral betting in the U.S. However, the Commodity Futures Trading Commission forced the platform offshore in early 2022.

In contrast to competitors like PredictIt and Kalshi, which recently prevailed in a lawsuit against the CFTC to operate in the U.S., Polymarket operates its platform on the blockchain Ethereum. According to Coplan, the crypto element provides greater visibility into its trading activity. “The beauty of Polymarket is it’s all peer-to-peer and transparent,” he recently posted on X.

Outlets from the Wall Street Journal to Fortune reported the betting odds on Polymarket in addition to more traditional metrics like polling data, highlighting the platform’s increased visibility during the recent presidential election. In a sign of growing credibility around prediction markets, polling star Nate Silver joined Polymarket as an advisor in July.

However, Polymarket’s crypto design and offshore operations have drawn scrutiny from other quarters. This includes recent reports claiming there is manipulative trading on the site—most notably by a single French trader who allegedly caused Trump’s odds to soar. Polymarket has insisted that the user has “extensive trading experience” and was not acting nefariously.

Wash trading

The evidence of wash trading on the platform appears to be a serious indication of misbehavior. To conduct its analysis, Chaos Labs examined on-chain data to identify high-volume traders, filtering out users who were likely engaged in normal activities like market making. It then separated users who exhibited signs of wash trading by examining their ratio of buy and sell orders and taking account of their share holdings compared to their trading volume. Chaos Labs concluded that around one-third of trading volume—and overall users—on the presidential market alone was likely wash trading, along with across all markets.

This practice is common across crypto applications, especially ones with the potential for future token launches and airdrops, where users often earn tokens based on activity. In September, The Information reported that Polymarket has explored launching its own proprietary token.

“The challenges of prediction markets are not unlike those of any other application with a market,” said Omer Goldberg, the founder of Chaos Labs, which is backed by Haun Ventures and develops data integrity software. “Wash trading is not specific to Polymarket.”

Trading volume

Both Chaos Labs and Inca Digital discovered another anomaly on Polymarket: The purported trading volume on its presidential market, reported in U.S. dollars on Polymarket’s website, does not match the on-chain data. Inca found the actual transaction volume on the presidential betting market to be around $1.75 billion, compared to Polymarket’s reported figure of $2.7 billion.

According to Chaos Labs, this is because Polymarket conflates traded shares with U.S. dollars. To clarify, users can buy shares of candidates at different odds. A “yes” share of Hillary Clinton for president costs just $0.01, given the vast unlikelihood that she will be elected, but Chaos Labs found that Polymarket is reporting that share as $1 of volume.

This discrepancy, coupled with the wash trading, highlights the untested nature of a platform on which many rely for signals about the presidential election.

However, Polymarket’s decision to operate on blockchain rails also means that researchers like Chaos Labs and Inca Digital can analyze activity. Coplan has