Prediction market Polymarket overhauls rules after study finds fraud
As rival platforms debate market safety, Polymarket is adding new time-weighted averages to prevent whales from tipping contract outcomes at the last second.
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As rival platforms debate market safety, Polymarket is adding new time-weighted averages to prevent whales from tipping contract outcomes at the last second.
Prediction market Polymarket overhauls rules after study finds fraud
Finance
How a five-second trick let traders drain millions from Polymarket
After months of public warnings from onchain analysts, the prediction market is moving to time-weighted prices to make artificial price pushes too costly.
By
Olivier Acuna
|
Edited by
Jamie Crawley
Aug 7, 2026, 3:09 p.m.
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Summary
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Polymarket is replacing single-price snapshots with time-weighted average prices for its short-dated crypto markets after research and trader complaints highlighted widespread settlement manipulation.
A study of five-minute bitcoin contracts found patterns of large last-second Binance trades that appeared to move prices before settlement, with most resulting losses in likely manipulated windows borne by retail traders.
The new system, which uses Chainlink Data Streams and short TWAP windows, mirrors safeguards used by rival platform Kalshi, which relies on regulated price indexes and moving averages to make brief price distortions harder and costlier.
Polymarket has
replaced the single-price snapshot used to resolve short-dated crypto contracts
with a time-weighted average price, or TWAP after months of trader complaints and research identifying hundreds of accounts whose activity was consistent with settlement manipulation.
The researchers
had found that 821 accounts made $8.2 million
in settlement windows they classified as likely manipulated, prompting criticism that Polymarket’s rules let a small number of traders profit at others’ expense.
“To protect market integrity in our crypto up/down markets, we're updating how these markets resolve,” Polymarket
said in the X post detailing the changes
. “To support liquidity through this transition, we're adding $1M in liquidity rewards across all impacted markets through the month of August.”
Five-minute markets will use a 30-second average, while 15-minute and four-hour markets will use a 60-second average, the platform explained. The data will be delivered through Chainlink Data Streams, it added.
“The vulnerability is structural,” the researchers from Stanford University and Singapore Management University wrote. “An asset-price contract settles on a financial price, and that price can be moved by trading the underlying market itself.”
The authors of the study examined roughly two months of five-minute bitcoin contracts. They found unusually large orders on Binance in the final seconds before settlement, followed by rapid price reversals in bitcoin.
The paper did not prove traders’ intent or directly establish that the spot-market orders were placed by the same people holding positions on Polymarket. But it found that, excluding market makers, 93% of the losses in windows classified as manipulated fell on retail traders.
“A bet the market treated as near-certain was overturned one time in three,” the authors wrote.
Polymarket did not respond to a CoinDesk email requesting more information.
Prediction market concerns
Before the July-dated study, Variance Lover, a pseudonymous onchain analyst, raised similar concerns, including in
one extensive and detailed post dated May 21
.
“By now, most people are aware that market manipulation has become a major problem on Polymarket’s 5-minute crypto markets. The mechanism is simple: accumulate a large position on Polymarket, then move the price on Binance during the settlement window to force the market to resolve in your favor.”
An Axis Robotics contributor who goes by
郡主Christine on X, on May 11 noted
that manipulation in Polymarket’s five-minute bitcoin market was becoming more severe, citing “precise reversals in the last few seconds.”
Responding to the post, a Polymarket developer,
Josh Stevens,
said “we are looking into this a bit deeper - don’t worry.”
Concerns about resolution vulnerabilities are not exclusive to Polymarket. Kalshi developer IcoBeast.eth said “this problem doesn't exist on Kalshi fwiw,”
on a post on X
, to which
Tomdnc replied
: “it literally does happen on Kalshi. I have seen with my own eyes.”
A Kalshi spokesperson told CoinDesk it resolves its markets using a regulated CF Benchmarks price index and can more easily investigate suspicious activity because all its traders are identity-verified.
The spokesperson acknowledged that offshore markets can affect prices. But it said its 60-second moving average, based on regulated exchanges, makes brief attempts to move a price “significantly harder and more expensive” than on platforms using instant snapshots. Kalshi added that arbitrageurs quickly correct artificial moves.
Kalshi said it has conducted 150 to 250 material investigations per quarter and made about 40 to 50 referrals to the Commodity Futures Trading Commission so far this year. Those are company-wide figures and are not limited to its short-dated crypto markets.
Polymarket
Prediction Markets
Kalshi
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