US Election: Polymarket Accused Of Wash Trading As Donald Trump’s Odds Surge

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As an analyst with over two decades of experience in financial markets, I have seen my fair share of market manipulation tactics and questionable practices. The recent allegations of wash trading against Polymarket are concerning, especially given its growing influence and the significance of its predictions for major events like the U.S. presidential election.

The decentralized prediction marketplace known as Polymarket is under review due to suspicions about potentially fraudulent trading activities on its site. As the 2024 U.S. presidential election approaches, Polymarket has been in the spotlight due to its predictions giving Donald Trump a high probability of victory, with data showing he has a 67% likelihood of beating Kamala Harris.

Polymarket Accused Of Wash Trading

A new study by Fortune has highlighted worries regarding suspected market tampering on Polymarket, with Donald Trump topping the rankings. Two blockchain research companies, Chaos Labs and Inca Digital, have carried out investigations and uncovered signs of fake trades within Polymarket’s presidential prediction 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 companies suggested that these trading behaviors might give users a false impression of the true popularity and activity levels of specific wagers on their platform. Polymarket has yet to make any public statements regarding these findings. Concerns have been raised by analysts about the potential impact of such alleged practices, as they could potentially erode trust in prediction markets – systems frequently employed as alternative gauges for political predictions.

Donald Trump Odds Surge Ahead of US Election

Ever since its establishment in 2020, Polymarket has amassed a significant user base, particularly during notable occurrences such as the U.S. presidential election. This platform operates on the Ethereum blockchain and enables users to wager on real-life events, distinguishing itself as a provider of “unconventional data” rather than a politically biased instrument.

According to Polymarket CEO Shayne Coplan, it’s important to note that Polymarket isn’t focused on politics. Instead, its objective is to clarify real-life happenings by utilizing the strength of free market principles.

Although Polymarket mainly operates offshore, its predictions have caught the attention of media outlets such as the Wall Street Journal and Fortune, which have featured its odds alongside conventional polling data. At present, Polymarket predicts that Donald Trump has a 67% chance of winning the presidential election against Kamala Harris, a prediction that has ignited discussions about the platform’s reliability and openness. This surge in Trump’s predicted chances corresponds with significant investments from a single French investor, who is said to have wagered approximately $45 million on Trump through various accounts.

Inconsistencies in Reported Trading Volume

Apart from the accusations of wash trading, Chaos Labs and Inca Digital discovered inconsistencies between Polymarket’s stated trading activity and real on-chain data. Polymarket announced that users have placed bets amounting to $2.7 billion in their presidential market, but according to Inca Digital, the actual transaction volume is approximately $1.75 billion.

Chaos Labs explained that the discrepancy was due to Polymarket valuing shares like U.S. dollars, meaning even shares for improbable outcomes, such as a bet on Donald Trump winning the presidency priced at a penny, could be reported as $1 in trading volume.

The disparity in reporting techniques has fueled more doubts about the reliability of Polymarket’s data, given the approaching U.S. election. Chaos Labs pointed out that while these practices are typical on crypto platforms, they could potentially distort the representation of user interest and market activity to the general public.

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2024-10-30 20:22