Markets Kalshi Responds to Allegations of Inflated Crypto Trading Volume
Kalshi explained that the perceived inflated trading volume results from a common industry practice of tracking maximum potential payouts rather than actual cash transactions, highlighting that its regulatory filings are publicly accessible and transparent.
By Omkar Godbole| Edited by Shaurya Malwa 39 minutes ago 4 min read Make preferred on Share Share this article Copy link X (Twitter) LinkedIn Facebook Email Make preferred on
Trader alleges Kalshi of fake crypto volume. (Mika Baumeister/Unsplash) Show- Kalshi’s crypto chief refuted allegations of wash trading after a quant analyst pointed out a $539 million trading volume alongside a $3.1 million open interest anomaly linked to repeated $5,500 trades.
- The analyst claimed that a CFTC-filed net-zero fee schedule encouraged fake trading, while Kalshi maintained that its fee structure effectively prevents volume manipulation.
- Kalshi clarified that its reported volume is based on industry standards that track maximum potential payouts rather than actual cash spent, underscoring the transparency of its public regulatory filings.
Kalshi, a regulated prediction market in the U.S., is currently under scrutiny for its newly introduced crypto perpetual futures contracts after unusual trading activity was highlighted on social media, suggesting inflated trading volumes.
The main contention revolves around the metrics used to gauge market health, with concerns raised about the significant trading volume compared to the number of open positions. IcoBeast.eth, who leads product development at Kalshi, defended the platform on X, asserting that the accusations arise from a misunderstanding of how the platform operates.
CoinDesk sought further comments from Kalshi but did not receive an immediate reply.
The Allegation
The controversy ignited when a quantitative analyst and co-founder of Stealth Neolab, known as Beni on X, highlighted a striking inconsistency in Kalshi's ether ETH$2,575.56 perpetual contract (ETH-PERP). He observed that it recorded $539 million in trading volume over 24 hours against an open interest of merely $3.1 million.
This implies that the trading volume is 174 times greater than the open interest, a scenario often indicative of wash trading, where artificial buying and selling inflate the trading volume while the actual engagement remains low.
Open interest is the total dollar value of active contracts at any moment, while trading volume indicates the total dollar value of contracts exchanged in a specific timeframe.
Beni supported his assertions with evidence of a peculiar pattern of repetitive $5,500 trades that accounted for up to 58% of Kalshi's ether perpetual trading volume over four days, calling it "undeniable proof" of volume manipulation.
Additionally, he referenced a rebate schedule filed with the Commodity Futures Trading Commission (CFTC) that permits certain Self-Clearing Members to effectively trade at no cost due to a 0.3-basis-point maker rebate offset by a 0.3-basis-point taker fee. He argued that this zero-cost trading incentivizes the inflation of trading volumes.
In the trading context, rebates are incentives, such as partial fee refunds, given to high-volume market makers to stimulate liquidity on a platform.
The Rebuttal
IcoBeast.eth initially dismissed the wash trading allegations on X, asserting that the platform's fee structure should deter such practices. However, as the discussion gained traction, he provided a comprehensive clarification to address the concerns.
He first pointed out a critical error in Beni's post, explaining that the Artemis chart referenced in the allegations measured prediction-market share rather than perpetual contract volume.
He further clarified the reasons behind Kalshi’s seemingly inflated volume, indicating that they follow the same reporting convention as Polymarket: volume is based on the maximum potential payout rather than the upfront cash invested. For instance, if a trader purchases 100,000 contracts at 30 cents each, they would spend $30,000 in cash, but the system records $100,000 in volume because that represents the total possible value of the contracts at maturity. This naturally inflates the reported volume figures while reflecting genuine user demand, not artificial trading.
Addressing the perpetual contracts, IcoBeast firmly denied the notion that Kalshi selectively chooses a limited group of Self-Clearing Members. According to CFTC regulations, "fair access" is a legal requirement, meaning any firm that meets the necessary capital and operational criteria can join.
“You claimed that ‘Here SCM means market makers that are selected by Kalshi lmfao’. This is not accurate. Any firm can become a Self-Clearing Member of a CFTC regulated exchange as long as they fulfill the regulatory requirements. 'Fair access' is mandated for us,” IcoBeast.eth stated.
Moreover, he emphasized that Kalshi does not provide rebates on its crypto event prediction contracts.
While acknowledging that rebate programs are standard across major platforms like CME Group, Hyperliquid, and Binance, he contended that Kalshi's advantage lies in its transparency. As a regulated Designated Contract Market (DCM), Kalshi is legally obligated to disclose all its incentive schemes publicly to the CFTC, rather than negotiating them privately.
He admitted that Kalshi's U.S. perpetual product is still developing but stressed that their regulatory obligations guarantee transparency.
“I’m the first to acknowledge that it’s early days for perps for us as we are venturing into uncharted territory (U.S. perps). However, the key difference between Kalshi and offshore perpetual exchanges is that while other exchanges operate in secrecy, we must publicly file our incentive programs, ensuring that what you see is genuinely what you get,” he remarked.
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