--- title: "Election Prediction Markets Show Discrepancy Between Trading Activity and Real-World Outcomes" url: https://noti.group/election-prediction-markets-show-discrepancy-between-trading-activity/ language: en publisher: "Noti Group" section: "Technology" published: 2026-10-16T14:19:22.000Z updated: 2026-10-17T02:11:07.863Z id: 47c3b984-a6a9-401f-9732-e1ba914b7e07 source: "Ars Technica https://arstechnica.com/tech-policy/2026/10/polymarket-saw-600-million-in-election-trades-after-the-elections-were-over/" attribution: "Link to https://noti.group/election-prediction-markets-show-discrepancy-between-trading-activity/ and name Noti Group when you quote or summarize this story." --- # Election Prediction Markets Show Discrepancy Between Trading Activity and Real-World Outcomes A recent surge in trading on a global prediction market platform has raised questions about its accuracy in reflecting public opinion. A recent surge in trading activity on a global prediction market platform has raised questions about how accurately these platforms reflect public opinion and real-world outcomes. The platform saw an unprecedented amount of money change hands after the elections were over. Two specific election markets on the platform generated a staggering $600 million in trading volume, exceeding what's typically seen in most political markets. This high level of activity was largely driven by bets placed on long-shot candidates who ultimately lost their respective races. In Ethiopia, for example, Prime Minister Abiy Ahmed's Prosperity Party secured an overwhelming majority in federal elections this summer, winning 438 parliamentary seats and cementing his position for another five-year term. However, the trading patterns on prediction markets told a different story, with surprisingly low volumes wagered on Ahmed himself winning. In contrast to these relatively modest bets, much larger sums were placed on other candidates who ultimately lost their bids for power. The chief of staff, Shimelis Abdisa, was a notable example, with over $41 million traded on his potential ascension to leadership. This disparity has left analysts wondering about the accuracy and reliability of prediction markets as indicators of public opinion. The trading activity observed on Polymarket's platform has raised several red flags among experts. According to Chris Park, a former Polymarket trader who now runs MSR Decode, nearly $284 million of the total $600 million in election trades came from pairs of accounts repeatedly buying and selling with each other. This pattern of seemingly pointless transactions has led analysts to suspect that volume manipulation was at play. Rajiv Sethi, an economics professor at Barnard College who researches prediction markets, agrees that this activity is "obviously some form of volume manipulation." An investigation into these trades revealed that Polymarket's head of global intelligence and investigations, Shana Bautista, had flagged the suspicious activity and blocked the accounts from trading. However, it remains unclear why these accounts were able to trade such a large volume before action was taken. The unusual nature of these trades is further complicated by the timing. The Ethiopia market on Polymarket remained open for several months after Ahmed's victory was all but certain, with bursts of seemingly irrational trading continuing for 123 days after the election. This has prompted users to express frustration and confusion about the unresolved status of the market. Polymarket's handling of a 2024 election market in Romania revealed another case of suspicious trading activity. The Romanian market was initially put on hold due to concerns about foreign interference before being reopened several months later. However, Polymarket left the original market open alongside the new one, creating an unusual situation that may have contributed to the anomalies observed. An algorithm designed by Sethi and his colleagues identified nearly all of the volume in the older Romanian market as suspicious wash trading activity. This was a significant finding, with 99.6 percent of volume flagged as potentially manipulated during certain weeks. Wash trading is a type of manipulation where accounts repeatedly buy and sell assets to create the illusion of heavy trading, while actually just moving money back and forth. It's banned on US-regulated exchanges and explicitly prohibited in Polymarket's terms of service. The presence of wash trading could explain the anomalies seen in both the Ethiopian and Romanian markets, but without knowing the identities of the traders involved, it remains unclear whether this is indeed what occurred. An analysis of Polymarket's trading activity after the Ethiopian election has revealed a possible explanation for anomalous behavior in the market. According to MSR Decode, the most likely culprit behind inflated trading volumes is "activity farming, where traders artificially boost their volume to gain an advantage. This theory suggests that traders may have been motivated by the possibility of receiving token allocation if Polymarket launches a cryptocurrency token. In 2025, Matthew Modabber, chief marketing officer at Polymarket, hinted at the prospect of a token launch without providing specific details. Experts say this behavior is nothing new in the cryptocurrency industry. Andre Guettler, director of Ulm University's Institute of Strategic Management and Finance, notes that such market manipulation is reminiscent of textbook examples" seen in other prediction markets. Further analysis of Polymarket's Ethiopian election market revealed that trading volumes were unlikely to be driven by sophisticated traders using algorithms to maximize profits. Instead, MSR Decode found that over 98% of trade loops - instances where individual wallets bought and sold to each other quickly - resulted in neither side losing or gaining money. In these trade loops, the median time accounts held onto contracts before selling them again was a mere nine seconds, indicating rapid-fire transactions rather than deliberate trading. The unusual trading patterns on Polymarket have been observed before, particularly in the markets predicting the 2028 US presidential election. Unlikely candidates such as Elon Musk and New York City mayor Zohran Mamdani were found to be central figures in much of the activity on these markets earlier this year. Their eligibility for the presidency was a significant factor in their popularity among traders. Polymarket's rival, Kalshi, has also faced scrutiny over unusual market activity in recent months. The company was accused of wash trading on its perpetual futures market for cryptocurrency, but it denied the allegations and attributed the unusual volume to incentives for market makers that create opportunities for other traders to profit from small price discrepancies. Polymarket's latest funding round, led by 1789 Capital, has significantly increased the company's valuation. The venture capital firm is notable for having Donald Trump Jr. as a partner, adding another layer of interest to Polymarket's recent developments. The company's explosive growth can be measured in volume traded, which indicates active users. With annualized revenue exceeding $1 billion and a valuation of an estimated $21 billion after the funding round, Polymarket is now one of the most valuable companies in its space. The Commodity Futures Trading Commission has declined to comment on whether it is investigating the significant trading activity on Polymarket following the US elections. This comes after previous investigations by the CFTC into suspected market manipulation on the platform, which often involved potential insider trading rather than other forms of suspicious activity. Polymarket has faced scrutiny in the past for wash trading and other anomalies, but the CFTC's reluctance to comment suggests that it may not be prioritizing these recent trades. The agency has issued substantial fines for similar behavior in other sectors, leading some to wonder if they would take action in this case as well. --- Source: [Ars Technica](https://arstechnica.com/tech-policy/2026/10/polymarket-saw-600-million-in-election-trades-after-the-elections-were-over/) Published by Noti Group: https://noti.group/election-prediction-markets-show-discrepancy-between-trading-activity/