Did a Polymarket trader rig election odds for a side bet?

Last week, crypto traders in prediction markets for the US presidential election noticed an anomaly. Alleging market manipulation, users claimed that wealthy traders were betting simultaneously in two markets, “slamming bids” in Polymarket’s primary market expiring November 4 in order to “steal a pot of $4 million” in a subsidiary market that expired September 6.

Traders shared screenshots of odd price action, with large sell orders and major price whipsaws.

The September 6 market used Polymarket’s main November 4 market as its oracle. For this reason, traders in the September 6 market did not need to correctly predict the outcome of the actual US election. Instead, this trade only required the price of the November 4 market to reach a certain threshold in order to influence the distinct market that closed last Friday.

Unfortunately, if there were indeed such traders attempting to temporarily manipulate Polymarket’s price, their strategy was ultimately unsuccessful. Despite attempts to flip the market on Friday, Donald Trump sustained his lead over Kamala Harris that day.

Unlike traditional prediction markets, Polymarket reveals the wallets of many traders on its marketplace. For this reason, researchers were able to trace funding transactions for the largest trader, self-named “DJTHolder,” to Coinbase.

The Polymarket profile for this trader shows a substantial loss of over $52,000. However, in the context of the wallet’s $2.9 million of assets, the loss amounts to a mere 1.7% decline.

Historically, prediction markets are typically thinly traded due to their opacity, limitations to the contracts they can offer, offshore operations, and the regulatory attention they tend to attract.

Governments around the world have shuttered most prediction markets before they become too much of a political nuisance. Indeed, a curious number of US users claim to be betting on Polymarket despite an ostensible ban on US users.

Nevertheless, Polymarket has sustained operations and grown considerably, despite claims of inappropriate trading or US customers. Polymarket prominently claims to prohibit US users from its platform.

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