Prediction market Polymarket overhauls rules after study finds fraud

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.”