Polymarket accused of double-counting trading volume, Paradigm research sparks industry controversy

A recent study by Paradigm points out that due to smart contract events being double-counted in statistics, the trading volume of the prediction market platform Polymarket may be overstated by about 100% on third-party dashboards. The release of the study quickly sparked heated debate among data teams, analytics firms, and competitors, and also exposed the structural challenges prediction markets face in measuring trading volume.

Analysis by Paradigm research partner Storm Slivkoff shows that Polymarket’s smart contracts generate an OrderFilled event of the same amount for both the maker and the taker for every trade. Most dashboards do not distinguish between the two sides when aggregating these events, resulting in each trade being counted twice. For example, a $4.13 YES trade would be recorded as $8.26 in trading volume on the dashboard.

This issue also appears in Polymarket’s CTF Exchange and NegRisk Exchange contracts, as they use an identical event trigger model. By building a trading simulator and auditing the code, Slivkoff pointed out that the correct trading volume should use a single-sided metric (either the maker or the taker side), rather than simply summing all events.

After applying the correction, Polymarket’s actual monthly trading volume for October and November 2024 should be about $1.25 billion, only half of the $2.5 billion previously displayed by most dashboards. Major data platforms such as DefiLlama, Allium Labs, and Blockworks have confirmed that they are updating their dashboards to correct the double-counting issue.

Polymarket quickly responded, stating that its official website has never double-counted and uses the same industry standards as Kalshi. Storm emphasized that the issue is not with Polymarket’s official data, but rather with the aggregation methods of third-party analytics tools.

Given that Paradigm is an investor in Kalshi, some industry insiders questioned the study’s competitive motives. Parsec Finance founder Will Sheehan said the research “looks like a hit piece,” while other analysts pointed out that Polymarket’s contract design is public and transparent, and the problem lies more with the way data is processed. Paradigm co-founder Matt Huang stressed that the research is focused solely on factual data.

Industry experts believe this controversy exposes the general challenges prediction markets face in measuring trading volume. In markets where low-value contracts are prevalent, nominal trading volume is often inflated and does not accurately reflect the scale of capital at risk. Therefore, open interest and fee revenue may provide a better picture of the industry’s actual health.

At a critical moment when Polymarket has obtained CFTC regulatory approval and is preparing to re-enter the US market, this debate has brought it extra attention. Meanwhile, as Polymarket plans to establish an internal market-making business, there is increasing discussion about its future market structure and transparency.