Polymarket Accused of Double-Counting its Buying and selling Quantity

Paradigm co-founder Matt Huang has amplified analysis alleging that prediction market Polymarket could also be inflating its reported buying and selling volumes by a knowledge aggregation error that causes double-counting throughout most third-party analytics platforms.

The findings, detailed by Paradigm analysis accomplice Storm Slivkoff, counsel the difficulty impacts public datasets and dashboards that depend on Polymarket’s disclosed figures, probably overstating the platform’s precise exercise by roughly 100%.

The controversy emerged as Huang reshared Slivkoff’s evaluation on X, sparking rapid pushback from Polymarket’s knowledge crew and criticism that Paradigm, an investor in rival platform Kalshi, was trying to discredit a competitor by technical semantics.

Technical Root of Quantity Dispute

Slivkoff’s investigation reveals that Polymarket’s sensible contracts emit separate OrderFilled occasions for the maker and taker sides of every commerce, leading to redundant representations of an identical transactions.

Most analytics dashboards compute quantity by summing these occasions, successfully counting the identical commerce twice.

A easy transaction involving YES tokens offered for $4.13 generates two OrderFilled occasions for that quantity, inflicting dashboards to report $8.26 in quantity somewhat than the precise $4.13 traded.

The complexity stems from Polymarket’s distinctive market construction, which helps eight distinct commerce sorts, together with standard swaps and split-merge operations through which individuals change USDC for opposing YES-NO positions.

Whereas no particular person occasion accommodates incorrect info, aggregating all OrderFilled occasions with out distinguishing between maker and taker representations leads to systematic double-counting of notional quantity and money circulation metrics.

The difficulty extends throughout each Polymarket’s CTF Change and NegRisk change contracts, which share an identical occasion emission patterns.

Slivkoff’s evaluation, which included constructing a transaction simulator and auditing contract code, demonstrates that correct measurement requires utilizing one-sided metrics, both taker-side or maker-side quantity, somewhat than summing redundant occasion streams.

When calculated appropriately, Polymarket’s precise month-to-month volumes for October and November 2024 had been roughly $1.25 billion every, roughly half the $2.5 billion figures displayed on most public dashboards earlier than corrections.

Trade Response and Aggressive Tensions

Polymarket’s Primo Information shortly disputed the characterization, insisting that the platform’s official web site shows notional taker quantity with out double-counting, in step with trade requirements utilized by Kalshi.

“This publish isn’t about Polymarket’s web site, it’s in regards to the widespread dashboards that folks use for monitoring Polymarket quantity,” Slivkoff clarified, emphasizing the difficulty impacts third-party analytics somewhat than Polymarket’s inner reporting.

Main knowledge suppliers, together with DefiLlama, Allium Labs, and Blockworks, confirmed they’re updating their Polymarket dashboards to eradicate double-counting after validating Slivkoff’s findings.

In the meantime, some analysts defended current practices, with Dragonfly knowledge head Hildobby claiming refined dashboards accounted for the excellence since 2024, although acknowledging the methodology remained undocumented till now.

The timing drew scrutiny, given Paradigm’s funding in Kalshi, Polymarket’s major US competitor.

Will Sheehan of Parsec Finance criticized the analysis as studying “a bit like a success piece when it’s simply knowledge being laborious and Polymarket’s contracts being open/onchain,” whereas others questioned whether or not the disclosure of Paradigm’s aggressive curiosity adequately addressed potential bias.

Storm defended the work as figuring out sincere errors ensuing from knowledge complexity somewhat than assigning blame, noting Polymarket itself bears no accountability for the way third events interpret its occasion streams.

Past the rapid quantity dispute, Nick Preszler of Melee Markets argued the controversy highlights broader measurement challenges in prediction markets, the place low-priced contracts can generate disproportionate notional quantity in comparison with precise capital in danger.

“If a consumer buys $10 price of contracts at .1c every, they’re risking $10, however get credited for $10,000 of quantity,” Preszler famous, advocating for various metrics like open curiosity and charge income to offer extra correct trade comparisons.

The talk comes as Polymarket prepares its full US relaunch following CFTC regulatory clearance and pursues a valuation of $12 billion to $15 billion.

Concurrently, the corporate is dealing with criticism over plans to ascertain an inner market-making operation that will commerce towards prospects, mirroring controversial practices already employed by Kalshi.

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