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 paper, “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 crypto 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 buy or sell real Bitcoin in the closing seconds, drag that reference price across the strike, and win the bet.
