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.<\/p>\n
The researchers had found that 821 accounts made $8.2 million in settlement windows they classified as likely manipulated, prompting criticism that Polymarket\u2019s rules let a small number of traders profit at others\u2019 expense.<\/p>\n
\u201cTo protect market integrity in our crypto up\/down markets, we're updating how these markets resolve,\u201d Polymarket said in the X post detailing the changes. \u201cTo support liquidity through this transition, we're adding $1M in liquidity rewards across all impacted markets through the month of August.\u201d<\/p>\n
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.<\/p>\n
\u201cThe vulnerability is structural,\u201d the researchers from Stanford University and Singapore Management University wrote. \u201cAn asset-price contract settles on a financial price, and that price can be moved by trading the underlying market itself.\u201d<\/p>\n
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.<\/p>\n
The paper did not prove traders\u2019 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.<\/p>\n
\u201cA bet the market treated as near-certain was overturned one time in three,\u201d the authors wrote.<\/p>\n
Polymarket did not respond to a CoinDesk email requesting more information.<\/p>\n
Before the July-dated study, Variance Lover, a pseudonymous onchain analyst, raised similar concerns, including in one extensive and detailed post dated May 21.<\/p>\n
\u201cBy now, most people are aware that market manipulation has become a major problem on Polymarket\u2019s 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.\u201d<\/p>\n
An Axis Robotics contributor who goes by \u90e1\u4e3bChristine on X, on May 11 noted that manipulation in Polymarket\u2019s five-minute bitcoin market was becoming more severe, citing \u201cprecise reversals in the last few seconds.\u201d<\/p>\n
Responding to the post, a Polymarket developer, Josh Stevens, said \u201cwe are looking into this a bit deeper – don\u2019t worry.\u201d<\/p>\n
Concerns about resolution vulnerabilities are not exclusive to Polymarket. Kalshi developer IcoBeast.eth said \u201cthis problem doesn't exist on Kalshi fwiw,\u201d on a post on X, to which Tomdnc replied: \u201cit literally does happen on Kalshi. I have seen with my own eyes.\u201d<\/p>\n
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.<\/p>\n