A Settlement Design Overhaul @Polymarket has moved its 5- and 15-minute crypto prediction markets to @chainlink TWAP (time-weighted average price) Data Streams, replacing the single-timestamp
@Polymarket has moved its 5- and 15-minute crypto prediction markets to @chainlink TWAP (time-weighted average price) Data Streams, replacing the single-timestamp price snapshot that sat at the centre of a settlement manipulation controversy. Under the new setup, five-minute markets settle on a 30-second average and 15-minute markets on a 60-second window, making last-second spot pushes significantly more expensive to execute profitably.
The structural change follows a joint study by researchers at Stanford University and Singapore Management University, which found that Polymarket's five-minute $BTC prediction contracts exhibited trading patterns consistent with settlement-price manipulation, with concentrated order-flow spikes on Binance in the seconds before contract expiration, followed by rapid price reversals. Researchers estimated that flagged traders generated roughly $8.2 million in profits, primarily at the expense of retail participants.
The core vulnerability was structural. Because settlement relied on Chainlink price feeds tied to the end-of-window spot price, traders had a window of opportunity to influence the reference price immediately before contracts expired. Researchers flagged 821 likely manipulators, estimating they collectively profited around $8.2 million, largely at the expense of retail participants. Researchers found little evidence of similar trading behaviour in Polymarket's 15-minute contracts, suggesting that longer settlement windows make it significantly more expensive and difficult to profitably influence prices.
@Polymarket has denied that manipulation occurred. Alongside the pricing upgrade, the platform is adding $1 million in liquidity rewards through August. @chainlink, for its part, notes that the markets have cleared over $9 billion in volume to date.
The authors of the Stanford study had already recommended replacing single-point settlement prices with time-weighted average prices, arguing it would reduce the impact of short-lived price spikes during the final seconds before contract expiration. The switch to TWAP Data Streams is, in effect, Polymarket acting on that recommendation ahead of any regulatory requirement to do so.
Legal scrutiny around prediction markets continues to intensify in the US, with multiple states challenging platforms including Kalshi and Polymarket earlier this year. The pricing overhaul gives the platform a stronger technical and integrity argument at a moment when regulators are paying close attention to how short-dated event contracts are settled.
Sources:Yahoo Finance: Stanford Study Finds Signs of Bitcoin Market Manipulation on PolymarketCoinpedia: Stanford Study Flags Bitcoin Market Manipulation on PolymarketPew Research Center: Trading Volume on Prediction Markets Has Soared
