- Polymarket has surged in popularity due to bets on the US presidential election.
- The platform, claiming to be the largest prediction market, faces allegations of widespread wash trading, particularly in its presidential bets.
- Reports suggest about a third of the presidential market’s volume on Polymarket may be from wash trading.
- The influx in betting volume is speculated to be influenced by potential market manipulation or an upcoming token launch.
Polymarket was mostly unknown in the crypto mainstream until a few months ago, but has become popular due to the US presidential election.
The online betting site, which claims to be the world’s largest prediction market, lets the user bet on all sorts of peculiar things, like whether a category 5 hurricane will hit the US before the election (currently a 1% chance) or whether the US will confirm the existence of aliens before the year 2024 ends (3% chance).
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But the race between Donald Trump and Kamala Harris to win the White House is probably the most talked-about bet on the platform. Polymarket reports the election has attracted around US$2.7 billion (AU$4.1 billion) in bets.
Two Blockchain Firms Reveal Widespread Issue
However, it seems that not all the betting is just fun and games; some of these bets, or rather the money flows behind them, seem more nefarious.
According to a report by Fortune, two blockchain firms have investigated activities at Polymarket and allege widespread wash trading on the platform.
One of the firms cited by Fortune, Chaos Labs, claims “wash trading constituted around one-third of trading volume on Polymarket’s presidential market”.
The second one, Inca Digital, alleges a “significant portion of the volume” might be due to wash trading.
Wash trading involves the simultaneous and repeated buying and/or selling of financial assets such as shares or cryptocurrencies to artificially inflate trade volume and manipulate the market by creating a misleading appearance of increased market activity.
The practice is considered illegal and unethical because it misleads investors about the true supply and demand characteristics of the asset or a market.
Something Else May Be Behind Volume Surge, Says Report
The report comes after claims by some media outlets that the high odds of Trump were a sign of market manipulation. However, the Fortune article suggested that it may actually not be the election that’s driving this but rather the fact that Polymarket might want to launch its own token.
The article claims that wash trading is “common across crypto applications, and especially ones with the potential for future token launches and airdrops”.
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Meanwhile, Trump’s odds of winning the election remain around the 65% mark, according to Polymarket. Interestingly, Harris is in a large lead when it comes to the popular vote. The Vice President is currently 22% ahead of the former president in the popular vote.
Of course, it’s not the popular vote that gets the next president into the White House but rather the Electoral College. So, in the end, it comes down to what matters most in every US election: the swing states.
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