Polymarket, a blockchain-based prediction market, is facing scrutiny over alleged wash trading on its platform. As the 2024 U.S. presidential election nears, Polymarket has drawn significant attention with its odds favoring Donald Trump, who currently holds a 67% chance of winning over Kamala Harris, according to the platform’s metrics.
Polymarket Accused Of Wash Trading
A recent report by Fortune reveals concerns about potential market manipulation on Polymarket as Donald Trump leads the metrics. Two blockchain analysis firms, Chaos Labs and Inca Digital, conducted investigations and found evidence of wash trading within Polymarket’s presidential betting market.
Wash trading is a form of market manipulation where the same entity buys and sells assets to inflate trading volume artificially. Chaos Labs reported that wash trading accounted for about one-third of the trading volume in Polymarket’s presidential market, while Inca Digital cited a “significant portion” of trades as suspicious.
Both firms indicated that these trading patterns could mislead users about the actual popularity and volume of certain bets on the platform. Polymarket has not publicly commented on the findings. Analysts worry that these alleged practices could undermine trust in prediction markets, which are often used as alternative indicators for political outcomes.
Donald Trump Odds Surge Ahead of US Election
Since its founding in 2020, Polymarket has gained a substantial following, particularly during major events like the U.S. presidential election. The platform, which operates on the Ethereum blockchain, allows users to place bets on real-world events, positioning itself as a source of “alternative data” rather than a politically driven tool.
Polymarket CEO Shayne Coplan emphasized this, saying, “Polymarket is not about politics.” He added that the platform’s aim is to demystify real-world events by leveraging the power of free markets.
Despite its offshore operations, Polymarket’s predictions have influenced media coverage, with outlets like the Wall Street Journal and Fortune reporting its odds alongside traditional polling data. Currently, Polymarket shows Donald Trump leading with a 67% chance of winning the presidential race against Kamala Harris, a figure that has sparked debate over the platform’s accuracy and transparency. This spike in Trump’s odds coincides with large-scale bets from a single French investor, who reportedly placed $45 million in cumulative bets supporting Trump through multiple accounts.
Inconsistencies in Reported Trading Volume
In addition to wash trading allegations, Chaos Labs and Inca Digital found discrepancies between Polymarket’s reported trading volume and actual on-chain data. While Polymarket claimed that users have wagered $2.7 billion in its presidential market, Inca Digital reported that actual transaction volume is closer to $1.75 billion.
Chaos Labs attributed this gap to Polymarket’s method of counting shares as U.S. dollars. For instance, shares for unlikely outcomes, such as a “yes” bet on Donald Trump for president, are priced at a penny, but the platform may report them as $1 in trading volume.
This difference in reporting methods has raised further questions about the accuracy of Polymarket’s data, especially as the U.S. election draws closer. Chaos Labs noted that while such practices are common in crypto platforms, they risk misrepresenting user interest and market activity to the public.
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