Stanford Study Finds $1.28M Transferred via Polymarket 5-Minute Bitcoin Settlement Manipulation

According to a Stanford University and Singapore Management University study, Polymarket's five-minute Bitcoin prediction markets enabled traders to manipulate settlement prices, resulting in approximately $1.28 million being transferred from retail traders to sophisticated participants during the sample period.

The researchers analyzed contracts introduced by Polymarket in July 2024, where traders bet on whether Bitcoin's price would end above or below a predetermined level after five minutes. Because contracts settle using Chainlink price feeds, traders have incentives to influence spot markets immediately before settlement. The study found sharp increases in Bitcoin spot-market order flow just before settlement, followed by rapid price reversals. Extending contract durations from five minutes to 15 minutes largely eliminated the manipulation effect.