wash trading

Executing offsetting buy and sell transactions to inflate apparent trading volume without taking real market risk. On prediction markets, wash trading can artificially boost platform metrics and distort liquidity signals, and is federally prohibited under the Commodity Exchange Act.

Cluster: Liquidity & Trading

Related Concepts

• market surveillance — Systematic monitoring of trading activity by exchanges or regulators to detect insider trading, manipulation, and other abusive practices. In prediction markets, surveillance is complicated by pseudonymous blockchain wallets and the absence of traditional issuer-based disclosure obligations.
• market manipulation — Deliberately trading to distort prices away from true probabilities for strategic or financial gain.
• market making — Continuously quoting bid and ask prices to facilitate trading, earning the spread while managing inventory risk.

Articles about wash trading

• The Detection of Wash Trading by Rajiv Sethi