Polymarket exploited traders who used five-second price manipulation windows to drain millions; platform now implements time-weighted pricing.
Security & Exploits ·
Traders exploited a five-second price manipulation window on Polymarket to drain millions from the platform, prompting the prediction market to adopt time-weighted pricing. The vulnerability persisted despite months of onchain warnings about the risk.
Polymarket operates as a USDC-based prediction market where users trade yes/no event contracts priced between 0 and 1, with settlement values of either one dollar or zero depending on outcome. The five-second window allowed traders to execute price movements that extracted value from the platform's pricing mechanism before corrections could occur.
The shift to time-weighted pricing represents a structural change to how the platform calculates and executes trades. Details on the scope of losses, the timeline of the exploit, and whether affected traders face clawback remain unclear.