Markets Kalshi has stated that it is not under investigation by the Commodity Futures Trading Commission (CFTC) regarding its trading practices.
The prediction market attributes unusual activity in its ether perpetual market to liquidity incentives.
According to Kalshi, the CFTC has not reached out to the firm and the company does not believe a formal investigation is in progress, countering claims of regulatory scrutiny concerning its trading activities.
Elisabeth Diana, a spokesperson for Kalshi, remarked, "We have not been contacted by the CFTC and don't believe there is any formal examination. As we’ve stated, these data patterns are typical of liquidity incentive programs and are common in financial markets."
Earlier reports from CoinDesk indicated that a significant portion of trading volume in Kalshi’s bitcoin and ether perpetual markets consisted of trades of identical sizes, with ether trades frequently clustered around $5,500 and bitcoin trades around $2,500 or $5,000.
The Wall Street Journal also noted that the CFTC was reviewing trading activities on Kalshi after observing nearly one million trades in the ether market being executed in similar amounts, assessing whether to initiate an enforcement investigation.
This trading behavior attracted attention from Beni, co-founder of research firm Stealth Neolab, who pointed out that Kalshi's ether perpetual market recorded about $539 million in trading volume over 24 hours, compared to just $3.1 million in open interest. He discovered that trades of exactly $5,500 accounted for 48% to 58% of the notional volume on four separate days in September, as reported from Kalshi’s public API.
Diana explained that these patterns can be attributed to Kalshi's liquidity incentive program, which encourages participants to supply liquidity.
"We provide our data to the CFTC daily, and it’s not unusual for them to review our data regularly," Diana noted in an interview.
The CFTC has not yet responded to a request for comment regarding the situation.
This scrutiny arrives as prediction markets are experiencing rapid growth, raising questions about how these platforms report trading volumes and monitor participant activities. Liquidity incentive programs are designed to reward market players for placing orders, thereby facilitating an environment where other customers can buy or sell.
Kalshi maintains that these incentives clarify the trading patterns that have drawn scrutiny, including spikes in similarly sized trades.
When asked about measures against wash trading and self-trading, Diana assured that Kalshi employs extensive tools and has a complete surveillance team in place. Wash trading refers to trades intended to create a false impression of market activity without any real change in economic exposure.
Diana also challenged the rumors circulating on social media regarding the exchange, stating, "Don’t believe everything you read on X. Many discussions were fueled by competitors' rumors."