Kalshi said nearly $5 billion in similarly sized Ether perpetual trades were linked to its liquidity incentive programs, while the company rejected claims that the activity amounted to wash trading.
Prediction market operator Kalshi said the Commodity Futures Trading Commission has not contacted the company and that it is unaware of any formal examination, following a report that the regulator was reviewing a surge in trading activity in its Ether perpetual futures market.
On Tuesday, The Wall Street Journal reported that the CFTC was examining a series of rapid trades clustered near $5,500, citing a person familiar with the matter. The trading pattern has sparked allegations of wash trading.
The scrutiny follows a sharp expansion in Kalshi’s perpetual futures business. Just one week after launching its perpetual futures markets in May, the company told CNBC that trading volume had already exceeded $1 billion.
Elisabeth Diana, Kalshi’s head of communications, dismissed the discussion as “rumors seeded by competitors.”
Diana said Kalshi had not been contacted by the CFTC and did not believe any formal examination was underway. She said the data patterns were typical of liquidity incentive programs and were common across financial markets, adding that readers should not believe everything posted on X.
Cluster of Trades Emerges in Ether Perpetual Futures
The trades occurred in one of Kalshi’s perpetual futures markets, where users speculate on an asset’s price without taking ownership of it. In this case, traders were betting on Ether’s price.
According to the Journal, trades worth roughly $5,500 each generated more than $5 billion in Ether perpetual volume over the past month.
The Journal also reported that Kalshi offered certain traders the chance to purchase company equity after reaching specific trading-volume targets, citing people familiar with the arrangements. The company also waived trading fees and made monthly cash payments to encourage high-volume traders to provide liquidity.
In a blog post on Wednesday, Kalshi attributed the repeated trade sizes to programs that compensate market makers for keeping buy and sell orders available at specified sizes and within set price ranges. The company said those payments reward order availability rather than the volume of trades executed.
The post did not directly address the equity purchase opportunity linked to trading volume targets, as reported by the Journal.
Kalshi Denies Wash Trading Allegations
Market makers support financial markets by continuously quoting prices for buying and selling assets, giving other traders ready counterparties for their transactions. They can earn from the spread between their purchase and sale prices, but they also face losses when prices move against them. Traders who accept these quoted prices are known as takers.
Kalshi said traders could earn profits from price changes on other exchanges by buying or selling at a market maker’s outdated quote.
“The fixed size trades are entirely consistent with a single maker putting up resting orders of a fixed size and getting traded against by many takers,”
Kalshi said.
It said hundreds of individual traders took a market maker’s orders, with the takers being “pretty consistently right” while the maker was “pretty consistently wrong.”
“This is a sign of genuine economic activity rather than wash (where you’d expect volume to increase without either side taking a profit/loss),” Kalshi said.
