Media: The share of fictitious trading on Polymarket in connection with the presidential election amounted to 30%

What’s new? About 30% of the activity on the largest decentralized cryptocurrency prediction market Polymarket, related to the US presidential election, is the result of fictitious trading. It is a method of market manipulation aimed at artificially increasing the volume of sales. Such conclusions were reached by analysts at Chaos Labs and Inca Digital in their independent research.

Material by Fortune

What else is known? Both companies claim that the actual volume of transactions on Polymarket amounted to only $1,75 billion, while the platform itself reports about $2,7 billion.

Chaos Labs attributed this discrepancy in transaction volume to the fact that Polymarket accounts for candidate bids in whole dollars, while individual stocks on the platform trade well below $1.

Data from blockchain analytics platform Dune also showed that the total open interest (OI) in the presidential election on Polymarket was just over $150 million. This figure is in contrast to the billion-dollar transaction volumes that traders make when selling their positions to other participants on the platform.

Until early October, the gap between the two main candidates, the 45th Republican president, Donald Trump, and current vice president and Democratic Party member Kamala Harris, remained small. That began to change when Trump beat Harris by 10 points on October 12.

His lead has only increased over time, and the former president is currently ahead of Harris with a 65% to 35% lead, which is unheard of in traditional US polls.

87% of users of the Polymarket prediction market faced losses

During its operation, the platform conducted 10,79 million deals worth $2,27 billion

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As the discrepancy grew, rumors of manipulation on Polymarket became more widespread, prompting the platform’s team to conduct its own investigation to weed out US users.

Following its findings, Polymarket said it had identified one user with four accounts and a total of $28 million worth of bets in favor of Trump. His identity was not disclosed, but it is known that he is an experienced trader and a French citizen with accounts under the nicknames Fredi9999, Theo4, PrincessCaro, and Michie.

The team also introduced additional checks to make sure that the main participants of the service are outside the United States.

Shortly after the investigation was published, another major trader Polymarket bet another $1,5 million on Trump.

Lookonchain analysts also discovered a trader who has bet over $8 million on Trump’s victory on Polymarket since October 11.

Source: X.com

At the moment, the amount of bets in favor of Trump exceeds $1 billion. One vote in his favor costs $0,65, against — $0,35. There are $647,5 million bets in Harris’ favor, with the value of votes reversed: $0,35 in favor and $0,65 against.

Other prediction markets, including Kalshi and Robinhood, have launched in the US following the legalization of election betting by a related court ruling in September in a case against the US Commodity Futures Trading Commission (CFTC). However Polymarket remains inaccessible to US investors.

Polymarket, founded in 2020 with backing from Peter Thiel’s Founders Fund, went offshore in 2022 under pressure from the CFTC. The platform runs on Polygon’s Layer 2 (L2) network based on the Ethereum blockchain.

In response to the Chaos Labs and Inca Digital submissions, the company said that Polymarket’s terms of use explicitly prohibit market manipulation.

“We strive to provide users with the fairest analysis possible and our transparency allows the market to decide,” a Polymarket spokesperson told Fortune.

Last month, Polymarket was integrated by aggregator Bloomberg Terminal. The platform’s CEO Shayne Coplan commented: “Entering mainstream news and finance before our eyes. <…> as 10s of millions of people build habit around relying on Polymarket forecasts as a source of truth, to make sense of what’s going on in the world.” Other major media outlets, including CNN, have also started referring to Polymarket in their stories.