Sign In Get Started

Polymarket TWAP Switch Follows $8.2M Manipulation Study

Crypto● Neutral

Polymarket TWAP Switch Follows $8.2M Manipulation Study

2026-08-08 19:15 UTCBy AlphaScala Research DeskSource reporting: financefeeds.comEditorial standards

Polymarket TWAP Switch Follows $8.2M Manipulation Study

Click a ticker for a live chart

Polymarket replaced instant settlement with time-weighted averages after a study found 821 accounts made $8.2M in likely manipulated windows. Retail traders bore 93% of losses.

Continue with

Dartmouth crypto ETF value falls 15% to $12.4M; shares unchanged

What is Bitcoin and how does it work?

Polymarket replaced the single price snapshot used to resolve short-dated cryptocurrency markets with time-weighted average prices. The change followed months of trader complaints and a study that identified 821 accounts making $8.2 million during settlement windows researchers classified as likely manipulated.

The platform said five-minute markets will now use a 30-second average. Fifteen-minute and four-hour contracts will use a 60-second average. Pricing data comes from Chainlink Data Streams.

“To protect market integrity in our crypto up/down markets, we’re updating how these markets resolve,” Polymarket said. It also said it would provide $1 million in liquidity rewards across affected markets during August to support trading during the transition.

The new method replaces a single-price snapshot at settlement. If the underlying asset can be moved briefly during that settlement window, even a temporary price distortion can determine whether a prediction-market position wins or loses.

Using a 30- or 60-second average does not make manipulation impossible. It forces anyone trying to influence settlement to keep the underlying price distorted for longer, making the strategy more costly and exposing the trader to arbitrageurs and broader market activity.

Researchers from Stanford University and Singapore Management University examined about two months of Polymarket’s five-minute Bitcoin contracts. They identified 821 accounts that collectively made $8.2 million during settlement windows they classified as likely manipulated.

“The vulnerability is structural,” the researchers wrote. “An asset-price contract settles on a financial price, and that price can be moved by trading the underlying market itself.”

The researchers found unusually large orders on Binance during the final seconds before contract settlement, followed by rapid reversals in Bitcoin prices. Their work did not prove traders’ intent or show that the same people placing spot-market orders also held the profitable Polymarket positions.

Excluding market makers, the researchers found that 93% of losses during windows classified as manipulated were incurred by retail traders. “A bet the market treated as near-certain was overturned one time in three,” the authors wrote.

Onchain analysts had described a similar potential strategy before the study. Traders could build a large prediction-market position and then trade aggressively in the underlying crypto market near settlement to push the reference price across the contract threshold.

Polymarket’s move from a single snapshot to a time-weighted average raises the cost of influencing short-term settlement prices. The researchers said the economics of manipulation become more attractive when a prediction-market payout is large relative to the cost of moving the underlying asset for a few seconds. A trader may be willing to accept a loss on a spot or derivatives trade if that move produces a larger gain on the prediction contract. Short-dated markets are particularly exposed because settlement can depend on tiny price differences.

A TWAP changes that calculation. Instead of winning by moving the asset across a threshold at a single instant, a trader must influence the average price over the full measurement period. The longer the averaging window, the more capital may be required and the greater the likelihood that other traders offset the move.

Extending settlement windows too far carries its own risk. It can cause a contract to reflect price action occurring after the period traders believed they were predicting. Platforms have to balance resistance to manipulation against the need for contracts to resolve close to their advertised cutoff.

Kalshi has said it uses a regulated CF Benchmarks price index and a 60-second moving average. The company argues that averaging prices from regulated exchanges makes brief attempts to move settlement levels harder and more expensive. It has also said identity verification helps it investigate suspicious trading activity.

Kalshi reported conducting 150 to 250 material investigations per quarter across its business and making about 40 to 50 referrals to the Commodity Futures Trading Commission so far this year. Those figures cover the entire platform rather than only short-term crypto contracts.

Polymarket's new pricing methodology is now in effect. The $1 million in liquidity rewards runs through August.