Researchers at Stanford College and Singapore Administration College discovered that Polymarket’s five-minute Bitcoin prediction markets create incentives for merchants to govern spot costs round settlement, permitting subtle members to revenue on the expense of retail merchants.
The research examined contracts wherein merchants guess on whether or not Bitcoin’s value would finish above or under a predetermined degree after 5 minutes. As a result of the contracts settle utilizing Chainlink value feeds based mostly on Bitcoin’s value on the finish of every buying and selling window, merchants have an incentive to affect the spot market instantly earlier than settlement.
Analyzing buying and selling exercise earlier than and after Polymarket launched the contracts in July 2024, the researchers discovered sharp will increase in Bitcoin spot-market order move simply earlier than settlement, adopted by fast value reversals, which have been per settlement-price manipulation.
The research estimated that the conduct transferred about $1.28 million from odd merchants to manipulators in the course of the pattern interval. The researchers mentioned extending contract durations from 5 minutes to fifteen minutes largely eradicated the impact.
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The researchers mentioned the outcomes don’t point out prediction markets are inherently susceptible to manipulation, arguing as an alternative that settlement design can cut back the danger. They pointed to longer settlement home windows and various pricing strategies, reminiscent of time-weighted common costs, as potential options.
The findings might lengthen past crypto. The paper notes that conventional exchanges, together with Nasdaq and Cboe, have proposed occasion contracts tied to asset costs, making contract design an more and more necessary consideration as prediction markets increase into regulated monetary markets.
World Cup fuels prediction market progress
Prediction markets posted report buying and selling volumes in June because the expanded 2026 FIFA World Cup fueled exercise throughout the sector. In accordance with DefiLlama information, Kalshi processed about $9.4 billion in buying and selling quantity in the course of the month, whereas Polymarket Worldwide dealt with roughly $4.3 billion.
The platforms’ World Cup winner markets have since generated greater than $5.4 billion in mixed buying and selling quantity, with Polymarket processing about $4.25 billion and Kalshi about $1.2 billion, in accordance with information from the 2 platforms on the time of writing.

World Cup winner bets on Polymarket. Supply: Polymarket
The sector’s progress has coincided with mounting authorized scrutiny. A number of US states have challenged corporations, together with Kalshi and Polymarket, this 12 months, whereas the Commodity Futures Buying and selling Fee has argued that federally regulated occasion contracts fall below its “unique jurisdiction” quite than state playing legal guidelines.
The dispute is now shifting by means of the federal courts, and authorized observers have mentioned conflicting appellate rulings might finally immediate the US Supreme Courtroom to resolve whether or not states or the CFTC have major authority over prediction markets.

