Is Polymarket untrustworthy? Foreign media: Presidential betting market suspected of wash trading, luring wash trading through airdrops

The prediction market is suspected of wash trading, and the authenticity of the volume is questioned.

The Block Prediction Market Platform Polymarket has recently been embroiled in wash trading controversy. According to a report by the well-known financial media Fortune, independent investigations by blockchain analysis firms Chaos Labs and Inca Digital found that about 30% of the trading activity on Polymarket regarding the 2024 US presidential election is suspected of wash trading. Wash trading is a market manipulation technique that artificially increases volume by the same entity acting as both a buyer and a seller, misleading other investors. The two analysis firms pointed out that the actual volume is about 17.5 billion US dollars, lower than Polymarket's claimed 27 billion US dollars. This difference is mainly due to Polymarket calculating the shares of candidates in integer dollars, despite the actual trading prices being much lower than 1 dollar.

In addition, Dune's data shows that the total open interest for the 2024 presidential election on the platform is only slightly higher than $150 million, a huge gap from the claimed volume of tens of billions. These findings have raised industry concerns about the transparency of prediction markets and the accuracy of data. Analysts are worried that these suspected wash trading activities may mislead users' actual popularity and perception of volume for certain bets, thereby affecting market confidence.

Image source: Open interest contracts related to the U.S. election on Dune Analytics Polymarket

Concerns about massive bets and market manipulation

As the 2024 U.S. presidential election approaches, the prediction results on Polymarket have sparked widespread attention. According to the platform's data, Donald Trump's chances of winning have reached 66.3%, leading over Kamala Harris. This data clearly deviates from traditional polls, raising concerns about market manipulation. An investigation revealed that a French investor placed a total of $45 million in pro-Trump bets through multiple accounts on the platform, which may have had a disproportionate impact on Trump's chances of winning.

Image source: Polymarket. According to Polymarket data, Trump's winning rate far exceeds that of Harris.

In response to these allegations, Polymarket launched an internal investigation in an attempt to filter out US users and potential market manipulators. The investigation revealed that an unnamed individual placed $28 million worth of pro-Trump bets on the platform through four accounts. While the identity of this individual has not been publicly disclosed, a spokesperson for Polymarket stated that they are an experienced trader. Subsequently, another account, unrelated to the previous individual, placed an additional $2 million worth of pro-Trump bets, made by a Large Investor.

Polymarket's response and future prospects

Polymarket has not publicly commented on the allegations of wash trading and market manipulation. However, its spokesperson stated in an interview with the foreign media CoinDesk:

"As researchers have pointed out, having the same trader on both sides of a market is not unique to Polymarket, nor is it inherently problematic," he emphasized. Polymarket's trades are transparent and public, and the company explicitly prohibits market manipulation in its terms of service.

Industry insiders pointed out that these suspected money laundering trading activities may be for 'AirdropMining', which is to obtain future possible issuance Tokens through increasing trading activity. Renowned encryption investor Nic Carter also stated that AirdropMining may be the most reasonable driving factor for such activities, rather than political manipulation.

Image source: X Nic Carter believes these transactions may all be for Airdrop

In summary, the wash trading controversy of Polymarket highlights the challenges that prediction markets face in transparency and regulation. As the election approaches, market participants and regulatory agencies need to strengthen monitoring of trading activities, ensuring market fairness and credibility, and further maintaining users' trust in prediction markets.

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