Prediction markets operator Kalshi said it has not been contacted by the Commodity Futures Trading Commission and does not believe a formal examination is underway, following reports that the regulator reviewed a surge of trading activity in its Ether perpetual futures market.
On Tuesday, The Wall Street Journal reported that the CFTC is examining a pattern of rapid trades clustered around $5,500 in Kalshi's Ether perpetual futures, citing people familiar with the matter. The trading pattern has drawn allegations of wash trading.
The scrutiny comes amid rapid growth in Kalshi's perpetual futures business. A week after launching the markets in May, the company told CNBC that trading volume had surpassed $1 billion.
Elisabeth Diana, head of communications at Kalshi, dismissed the reports as "rumors seeded by competitors." "We have not been contacted by the CFTC and don't believe there is any formal examination," Diana told Cointelegraph. "As we've said, these data patterns are typical of liquidity incentive programs and common in financial markets. Don't believe everything you read on X."
According to the Journal, the trades of roughly $5,500 each accounted for over $5 billion in Ether perp volume over the past month. The newspaper also reported that Kalshi offered some traders opportunities to buy equity in the company if they met trading-volume targets, and that it waived trading fees and provided monthly cash payments to encourage large traders to provide liquidity.
In a blog post on Wednesday, Kalshi attributed the repeated trade sizes to programs that pay market makers to keep buy and sell orders available at specified sizes and within a set price range, saying those payments reward the availability of orders rather than the volume of trades executed. The post did not directly address the equity-purchase opportunity tied to volume targets reported by the Journal.
Kalshi defended the activity, writing that "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." It said the trades involved hundreds of distinct traders taking a market maker's orders, with takers "pretty consistently right" and the maker "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)," the company said.
Market makers help financial markets function by continuously quoting prices at which they are willing to buy and sell an asset, giving other traders ready counterparties. They profit from the bid-ask spread but risk losses when prices move against them. Traders who accept their quoted prices are known as takers.
