Prediction Laundering: The Illusion of Neutrality, Transparency, and Governance in Polymarket

• URL: http://arxiv.org/abs/2602.05181v1
• Date: Thu, 05 Feb 2026 01:19:25 GMT
• Title: Prediction Laundering: The Illusion of Neutrality, Transparency, and Governance in Polymarket
• Abstract summary: This paper presents a qualitative sociotechnical audit of Polymarket (N = 27), combining digital ethnography, interpretive walkthroughs, and semi-structured interviews.<n>We show how subjective, high-uncertainty bets, strategic hedges, and capital-heavy whale activity are stripped of their original noise through algorithmic aggregation.
• Score: 17.356126657763806
• License: http://creativecommons.org/licenses/by/4.0/
• Abstract: The growing reliance on prediction markets as epistemic infrastructures has positioned platforms like Polymarket as providers of objective, real-time probabilistic truth, yet the signals they produce often obscure uncertainty, strategic manipulation, and capital asymmetries, encouraging misplaced epistemic trust. This paper presents a qualitative sociotechnical audit of Polymarket (N = 27), combining digital ethnography, interpretive walkthroughs, and semi-structured interviews to examine how probabilistic authority is produced and contested. We introduce the concept of Prediction Laundering, drawing on MacFarlanes framework of knowledge transmission, to describe how subjective, high-uncertainty bets, strategic hedges, and capital-heavy whale activity are stripped of their original noise through algorithmic aggregation. We trace a four-stage laundering lifecycle: Structural Sanitization, where a centralized ontology scripts the bet-able future; Probabilistic Flattening, which collapses heterogeneous motives into a single signal; Architectural Masking, which conceals capital-driven influence behind apparent consensus; and Epistemic Hardening, which erases governance disputes to produce an objective historical fact. We show that this process induces epistemic vertigo and accountability gaps by offloading truth-resolution to off-platform communities such as Discord. Challenging narratives of frictionless collective intelligence, we demonstrate Epistemic Stratification, in which technical elites audit underlying mechanisms while the broader public consumes a sanitized, capital-weighted signal, and we conclude by advocating Friction-Positive Design that surfaces the social and financial frictions inherent in synthetic truth production.

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