Traders Scammed $8.2 Million Using Bitcoin Prediction Bets

Researchers from Stanford and Singapore Management University have identified a flaw in Polymarket contracts that allowed a group of traders to siphon $8.2 million from the platform. The issue involved binary bets that paid out based on whether Bitcoin closed higher or lower over a five minute window. Because the settlement relied on a price oracle, traders found they could artificially push the price of Bitcoin on major exchanges just before the window closed to guarantee a win.

Data shows that just over 800 traders exploited this gap, often striking during quiet market hours on weekends or late at night. These individuals triggered massive order flow in the final seconds of a contract, effectively forcing the settlement price in their favor. The study confirms that 93 percent of the losses resulting from these manipulated cycles were absorbed by regular retail participants.

While the platform saw massive trading volume from these products, the study highlights a clear risk for similar prediction markets. The authors noted that extending the time window to fifteen minutes made manipulation much harder, as the cost to influence the price for a longer duration is significantly higher. This research serves as a warning as traditional stock exchanges look to introduce their own binary price contracts.