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BTC New research from Stanford University and Singapore Management University: Polymarket's five-minute bitcoin forecast market may have an unfair advantage
A new study from Stanford University and Singapore Management University shows that Polymarket's five-minute bitcoin forecast market may give sophisticated traders an unfair advantage. The researchers analyzed nearly 16,000 Bitcoin contracts over two months and found that trading patterns suggested that some participants were able to temporarily influence the price of Bitcoin before settlement, thereby benefiting from it.
How the strategy works
Polymarket's five-minute contract allows users to bet whether the final price of Bitcoin is above or below a specific price. Because the results depend on a single Chainlink price data at a given moment, traders holding large positions are accused of trading intensively in the last few seconds, thereby pushing the spot price of Bitcoin in their favor.
The study identified a total of 821 suspected manipulators and estimated that they earned approximately US$8.2 million. Another estimate in the report showed that approximately $1.28 million was actually transferred from ordinary traders to these participants during the study period.
Researchers also found that Binance's trading volume soared to nearly 3.9 times normal during the settlement window. Bitcoin prices usually fall back quickly a few seconds after the contract is closed. At the same time, they pointed out that they could not directly prove that Binance traders and Polymarket Wallet belonged to the same group of people, so they believed that the evidence was circumstantial evidence.
Researchers believe the solution is simple
The report found that when the contract time was extended from five minutes to fifteen minutes, the manipulation problem basically disappeared. The report also recommends using a time-weighted average price (TWAP) instead of a single settlement price. This will make it much harder for someone to influence results through rapid price surges.
Polymarket said it did not believe there was any manipulation, but did confirm plans to add average price settlement methods for certain markets over the next year. Binance said its platform itself has a monitoring mechanism, but cannot control how third-party prediction markets determine how its contracts will be settled.
Why is this not just about cryptocurrencies?
Researchers say it's not just about cryptocurrencies. As institutions such as the Chicago Board Options Exchange expand event contracts linked to the S & P 500, and Nasdaq is promoting similar products, the same settlement risk could arise if the contract relied on a single price snapshot.
This finding comes at a time when the forecast market continues to be booming. According to DefiLlama, Kalshi's trading volume in June was approximately US$9.4 billion, while Polymarket International's trading volume was approximately US$4.3 billion. The expansion of the 2026 World Cup has played a huge role in promoting it. The total transaction volume generated by the event exceeds US$5.4 billion, of which Polymarket contributed approximately US$4.25 billion and Kalshi approximately US$1.2 billion. Researchers believe that better settlement models could make these fast-growing markets more difficult to exploit.
In addition, the forecasting market is also facing increasingly stringent regulatory scrutiny. Several U.S. states have questioned platforms such as Kalshi and Polymarket. At the same time, the U.S. Commodity Futures Trading Commission (CFTC) claims that it has primary jurisdiction over federally regulated event contracts. The dispute has now entered the federal court and may eventually appeal to the Supreme Court.
