Polymarket’s short-duration Bitcoin market has been flagged for a structural weakness that traders could exploit. According to CoinDesk, some participants used a last-seconds price push to game the settlement mechanism in Polymarket’s five-minute BTC contracts, redirecting millions of dollars away from retail traders.
A settlement design that left room for abuse
The issue centers on how the contract works. A new round opens every five minutes. If Bitcoin ends that five-minute window above its opening price, traders who bet on “up” receive $1, while those on “down” get nothing.
The outcome is determined by the Chainlink price at the exact close of the window. That gave traders an opening: in the final seconds before settlement, they could place large spot buy or sell orders to push Bitcoin higher or lower, influence the result, and then see the price reverse quickly afterward. In the report’s framing, the market effectively turned into a tool for extracting value through short-lived manipulation in the spot market.
Researchers estimate $8.2 million shifted from retail traders
Researchers estimated that the strategy moved about $8.2 million from retail traders to manipulators. The same research found that similar manipulation was almost absent in 15-minute contracts.
That finding also points to possible remedies. Extending the settlement window, or using a time-weighted average price, or TWAP, instead of a single point-in-time price, could sharply reduce the structural weakness.
Polymarket had previously patched another issue
ABMedia also noted that Polymarket had previously fixed another problem described as “ghost fills.”
The article added that readers looking to understand how prediction markets work and the risks involved can refer to Chain News’ full explainer on Polymarket.