Crypto Volume Scrutiny
Kalshi Faces Wash-Trading Allegations Over Unusually High Crypto Market Volumes
Anonymous
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Independent analysts also flagged repeated trades at identical prices and sizes within seconds, same wallet addresses appearing on both sides of the order book, and frequent zero-spread conditions in Kalshi’s short-duration Bitcoin markets. In some markets, maker-side activity reportedly exceeded 80% of total volume.
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Kalshi’s binary event-contract structure may itself encourage rapid, high-frequency trading: contracts settle at either $0 or $1, allowing traders to seek small price discrepancies without requiring a large move in the underlying asset, while frequent expirations can further increase turnover.
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Kalshi’s temporary perpetual-fee program was certified in a CFTC filing on Sept. 16 after being submitted Sept. 2. The filing says the program applies to all perpetual markets and is scheduled to continue through Dec. 31 unless changed or terminated earlier; eligible cryptocurrency-perpetual taker fees are rebated to 0.3 basis points, while eligible makers receive rebates resulting in a net 0.3-basis-point payment.
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Kalshi’s crypto lead, IcoBeast, said the company does not offer rebates in its crypto prediction markets and argued that perpetual-market incentives are comparable to programs at CME Group, Hyperliquid and Binance. He also denied that Kalshi directly selects its own clearing members.
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Beni said he had obtained additional information about the allegations but would wait to disclose it until after receiving legal advice, leaving open the possibility of further claims or evidence beyond the material initially posted.
Kalshi, a CFTC-regulated prediction market platform, faces allegations of wash trading in its crypto perpetual futures contracts, particularly its Ethereum market. Stealth Neolab co-founder Beni accused the exchange of fabricating volume on September 20, citing $538.6 million in 24-hour ETH-PERP trading against just $3.1 million in open interest — a ratio suggesting the entire open position turns over every 8 minutes. The Wall Street Journal confirmed the U.S. Commodity Futures Trading Commission is investigating the unusual $5 billion trading pattern, though no enforcement action has been announced.
Kalshi's crypto lead, IcoBeast, rejected the allegations on X, saying critics confused prediction market volumes with perpetual futures and that Kalshi's market-making incentives match programs used by major exchanges like CME and Binance. Kalshi maintains the trades reflect genuine economic activity where fast retail takers profited off a slow market maker's fixed orders. The dispute is likely to intensify scrutiny of Kalshi's volume reporting and fee rebate practices as the platform pursues a reported $40 billion valuation.
Nearly One Million Identical Trades Spark Volume Concerns
Independent analysts flagged unusual trading patterns: roughly 47% to 58% of daily ETH-PERP volume consisted of trades at exactly $5,500, a fixed size. Beni posted API data showing almost 1 million such transactions since August, totaling over $5 billion. The same wallet addresses appeared on both sides of order books in some cases, and Bitcoin markets showed zero-spread conditions and maker-side activity exceeding 80% of total volume.
The volume-to-open-interest ratio raises red flags among traders. At 174:1, the data suggests each dollar of open interest cycles through 174 times daily — far above organic market activity. Accusers say this pattern mirrors wash-trading tactics seen in unregulated offshore exchanges, where incentivized market makers and fee rebates artificially inflate volume to attract traders.
Kalshi's Perpetual-Fee Program Launched Before Allegations
Kalshi submitted its temporary perpetual-fee rebate program to the CFTC on September 2 and received certification on September 16 — four days before Beni's public accusations. The program sets eligible cryptocurrency perpetual taker fees at 0.3 basis points (0.003%) and provides matching 0.3-basis-point maker rebates, netting zero cost for selected participants. The filing shows the program applies to all perpetual markets through December 31, 2026.
The fee structure is designed to build liquidity in nascent crypto perpetuals markets. IcoBeast noted that CME Group, Hyperliquid, and Binance operate similar incentive programs. However, critics argue zero-cost trading — combined with guaranteed rebates — creates conditions where market makers can trade profitably against retail or fast takers without incurring risk, a hallmark of wash-trading schemes.
Binary Contract Structure Naturally Encourages High Turnover
Kalshi's core product — prediction contracts settling at either $0 or $1 — may inherently drive rapid trading. Traders can profit from tiny price moves without large swings in underlying assets. Frequent expirations also incentivize frequent turnover. When Kalshi expanded into regulated perpetuals, the same dynamics may have carried over, enabling high-frequency strategies with minimal capital at risk.
Kalshi disputes this framing. The exchange argues that because taker traders were consistently profitable and maker traders consistently lost money, real economic value changed hands — eliminating wash-trading risk. The Defiant reported Kalshi's statement: 'All the trades that both sides wanted to take at the time... one side was pretty consistently right (the takers) and one side was pretty consistently wrong (the maker).' Kalshi contributed $40 million to a guaranty fund backing perpetuals, signaling confidence in market integrity.
CFTC Inquiry Leaves Outcome and Further Disclosures Uncertain
The CFTC is investigating but has not filed enforcement charges or announced formal allegations. Beni said he obtained additional evidence about the claims and would disclose it after legal review, signaling more details may emerge. The regulator could demand Kalshi overhaul fee structures, cap volumes, or implement self-match prevention tools — common remedies in manipulation cases.
The dispute occurs as Kalshi pursues aggressive expansion: the platform filed for CFTC approval to offer margin trading on 58 event contracts and is reportedly raising capital at a $40 billion valuation. A finding of market manipulation could delay approvals and dent investor appetite. Both sides — Kalshi's leadership and independent critics — continue sparring on social media, suggesting the controversy will intensify before resolution.
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