A new study argued that Polymarket’s five-minute Bitcoin contract became a machine for wealth transfer. It moved money from retail bettors to a small band of manipulators, and it made Bitcoin’s spot price worse in the process.

The , “Settlement Manipulation in Prediction Markets” by David Dai, Ruizhe Jia, and Shihao Yu of Stanford and Singapore Management University, studied a product that did not exist before February 12, 2026. 

On that date Polymarket launched a binary contract that paid $1 if Bitcoin closed a five-minute window above where it opened, and $0 otherwise. A fresh contract opened every five minutes around the clock. 

Within months, Polymarket’s five- and fifteen-minute up/down markets traded more than $4 billion and tripled the platform’s daily volume. The flaw in polymarket was when the contract settled against a Chainlink oracle that averaged Bitcoin’s price across major spot exchanges. 

A trader who held the contract could in the closing seconds, drag that reference price across the strike, and win the bet.

The oracle’s blend of exchanges looked like a defense, because moving it seemed to require moving many venues at once. The authors showed it was not much of a defense. Binance, the largest crypto exchange, sat about two and a half basis points from the oracle and moved near one-for-one with it. It finished on the same side of the strike as the resolution about 85%of the time. A push that drove the Binance price a few basis points past the strike carried the outcome.

The pattern was in the Binance data. After the five-minute contract went live, net order flow in the final ten seconds before each close jumped about 50% above the pre-launch level. The spike was sharpest where a push mattered: in the 6% of cycles the market judged near-even, the jump was about 3.9 times the rest.

The reversal gave it away. Real information stays in a price; a manipulative push does not. Within ten seconds the price reverted, by about a quarter in the near-even cycles. The pushes clustered in thin hours, when a dollar of flow moved the price the most: 56% landed overnight and 44%on weekends.

Who won, who paid with these Polymarket bets

In near-even cycles, a push against the favored side flipped the winner 65% of the time, against 41% in normal trading. Even when one side held a 90-to-100% chance before the close, a push against it reversed the outcome 34% of the time, against 1% in cycles with no push. A bet the market treated as near-certain lost one time in three.

Because settled on a public blockchain, the authors traced each wallet. Just 821 traders fit the manipulator profile, about one in three hundred of the 243,000 who traded the contract. They took $8.2 million in the pushed cycles and broke even in the rest. Of the losses, 93% fell on retail.

The authors ruled out hedging as the innocent explanation. A binary contract carried little exposure to hedge once one side was near-certain, yet those were the cycles a push flipped. And the trades arrived in one burst in the final fifty seconds, not as a position built over the window.

The remedy

The fix was the contract’s horizon. Manipulation was absent from the fifteen-minute contract, because a longer window took in more ordinary trading before the close and made a fixed push a weaker force. The stakes reached past crypto: Nasdaq and Cboe each filed with the SEC to list binary asset-price contracts on equity indices, which would carry the same risk onto larger markets.

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