Stanford Study Finds Signs of Manipulation in Polymarket Bitcoin Betting Markets

TLDR

• Stanford University researchers found signs of possible manipulation in Polymarket’s five-minute Bitcoin betting markets
• Traders may have briefly pushed Bitcoin’s price on Binance just before bets closed to influence outcomes
• Suspected manipulators earned an estimated $8.2 million over two months, mostly at retail traders’ expense
• Polymarket says it uses multiple price oracles and plans to move to longer settlement windows
• The findings could have wider implications as Cboe and Nasdaq expand prediction markets tied to financial assets

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Stanford University researchers say they have found evidence that traders may have been manipulating Bitcoin betting markets on Polymarket, one of the world’s largest prediction market platforms.

Polymarket Bitcoin Bets Show Signs of Price Manipulation, Stanford Study Finds – Bloomberg https://t.co/Lz72hVV3ZU

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The working paper, co-authored with a researcher at Singapore Management University, looked at roughly 16,000 five-minute Bitcoin contracts over two months. Researchers found bursts of one-sided trading on Binance in the final seconds before bets closed.

Those bursts temporarily moved Bitcoin’s price in the direction that benefited certain traders. The pattern was most common when small price moves could change which way a bet settled.

How the Manipulation May Have Worked

Prediction markets on financial assets have a built-in weakness, the researchers say. Unlike bets on elections or sports, traders can actually buy or sell the asset that determines whether they win or lose.

“These contracts have a structural vulnerability,” wrote Singapore Management University assistant professor Shihao Yu. “They settle on a price that traders can move by trading the underlying asset itself.”

Polymarket uses price data from independent oracles rather than a single exchange. Even so, researchers found the contracts resolved on the same side as Binance about 85% of the time during the study period.

In the settlement windows with the most unusual Binance trading activity, order flow was about 3.9 times larger than in typical windows. That unusual activity happened most often overnight and on weekends, when thinner markets make it easier to move prices.

Who Profited and What Polymarket Says

Based on their analysis, researchers estimate traders they flagged as likely manipulators made around $8.2 million over the two months studied. That money came largely at the expense of retail traders.

Elton Shehdula, head of research at crypto analytics firm Allium, said the pattern looks real but acknowledged a key missing link. “The harder question is whether the traders pushing the price on Binance and the Polymarket wallets collecting the winnings are connected,” he said.

Polymarket said it uses multiple independent pricing oracles to ensure accuracy. The company said it plans to shift certain markets to settlement methods that use prices over a longer period rather than a single point in time.

Binance said it maintains market surveillance and anti-manipulation controls but cannot oversee how other platforms design their settlement methods.

The researchers found little evidence of similar activity in 15-minute Bitcoin markets, suggesting longer time horizons reduce the risk.

The findings come as Cboe has started rolling out prediction market products tied to the S&P 500 index, and Nasdaq has sought regulatory approval for similar contracts. Cboe said its products operate within the US securities framework and differ from Polymarket’s structure.

The paper does not prove intent or directly link Binance traders to Polymarket accounts, but researchers say the evidence is consistent with manipulation.