A study from Stanford University and Singapore Management University has found that Polymarket's five-minute Bitcoin contracts were systematically manipulated, with a small group of traders extracting $8.2 million by pushing the spot price on Binance just before settlement. The manipulation occurred in the final 10 seconds of the betting period, according to the research, which was conducted by a team including David Dai.
How the scheme worked
The researchers identified a clear pattern. Traders would place large orders on Binance in the seconds before Polymarket's five-minute Bitcoin contracts settled. Because Polymarket's settlement price is tied to the spot market, even a small price shift could flip the outcome. The study found that this happened repeatedly, always in the last 10 seconds, allowing the same group to profit consistently.
The study's findings
The study examined a set of five-minute Bitcoin contracts on Polymarket and found systematic evidence of manipulation. The total extracted amount came to $8.2 million. The researchers, including David Dai, documented that the manipulation was not random but followed a coordinated pattern of last-second price moves on Binance. The study's authors say the data points to a small group of traders who executed the scheme repeatedly.
The findings raise questions about the integrity of settlement mechanisms in prediction markets that rely on external price feeds. Polymarket's five-minute contracts are particularly vulnerable because the short time window makes it easier for a small group to influence the outcome. The study suggests that such markets may need to implement additional safeguards, such as using a time-weighted average price or multiple oracles to prevent last-second manipulation.
The study has been published and is accessible online from the researchers.
