Polymarket “Zombie Markets” Raise Questions About Wash Trading and Market Oversight

Polymarket says it blocked an account after identifying suspicious activity in markets related to Ethiopia’s election. Shana Bautista, Polymarket’s head of global intelligence and research, told WIRED that her team “immediately flagged this activity, investigated it, and blocked the account from trading.”

Polymarket did not respond to follow-up questions about why the account was able to complete so many transactions before action was taken.

Trading continued after Ethiopia’s election outcome was clear

The timing of the trades made the activity particularly unusual. Under Polymarket’s rules, the Ethiopian market was scheduled to resolve in October, after the prime minister was formally appointed and sworn in. That meant the market remained open for months after Mr. Ahmed’s victory was considered almost certain.

In the 123 days after the election, a spike in seemingly irrational transactions continued. Some Polymarket users responded with comments such as “Isn’t this fixed?” and “Fuck.”

Sethi describes this type of market as a “zombie market”—a market that allows people to buy or trade contracts tied to events that have already happened or are no longer taking place.

Romania election market showed signs of possible wash trading

A market related to Romania’s 2024 elections produced what Sethi described as an “even more dramatic” trading anomaly. The first election was called off because of concerns about foreign interference. A new race took place a few months later, but Polymarket did not close the original market during the interim. Instead, it continued alongside the new election market.

During that period, Sethi and his colleagues noticed unusual activity in the older market. Their algorithm, designed to flag potential wash trades on Polymarket, identified nearly all of the trading volume as suspicious.

“99.6% of the volume in this market in a given week was wash trades,” Sethi said.

What is wash trading?

Wash trading is a form of market manipulation in which an account repeatedly buys and sells assets to create the appearance of strong trading activity. In reality, the funds are simply moving back and forth between transactions.

Wash trading is prohibited on US-regulated financial exchanges and is specifically prohibited under Polymarket’s Terms of Use. An earlier study by Sethi and colleagues found evidence of widespread wash trading on Polymarket’s offshore platform.