Kalshi is facing accusations that repeated trades in its Ethereum perpetual futures markets may be inflating reported volume, raising questions about market integrity, fee incentives and the company’s position in the prediction market sector.
Wash trading allegations
Industry observers identified a pattern of contracts changing hands in repeated $5,500 trades. Those transactions are alleged to represent roughly half of Kalshi’s Ethereum perpetual futures volume in recent days.
Wash trading involves buying and selling the same financial instrument back and forth to create the appearance of stronger market activity. The practice is easier to carry out in perpetual futures markets because participants trade price exposure rather than transferring the underlying asset from seller to buyer.
The allegations suggest that Kalshi could be presenting itself as a high-volume cryptocurrency perpetual futures platform alongside its prediction markets. Inflated volume could make the company appear larger, potentially helping it attract additional funding and investment.
Unlike many of Kalshi’s other markets, cryptocurrency perpetual futures compete with established crypto-native platforms. Kalshi charges maker and taker fees, which would normally make wash trading a negative-sum activity. However, its rules allow “self-clearing members”, often highly capitalised institutional market makers, to participate in rebate programmes.
Under those programmes, members pay less than 1/100th of 1% of the posted fees. The taker fees match the maker net, meaning two entities in the programme could theoretically trade the same assets with each other while paying no net fees.
Kalshi rejects the claims
Kalshi described the wash-trading allegations as false in a company blog post. It said its rulebook explicitly prohibits the practice, that it knows who is trading and that its systems block self-trades. The company also said surveillance monitors for pre-arranged trades between partners and that it had seen no evidence of collusion or wash trading.
Kalshi said the Ethereum transactions cited in the allegations represented “genuine economic activity”. It also pointed to CFTC oversight, noting that the regulator prohibits wash trading.
Kalshi has argued that liquidity and volume are the key measures for perpetual futures markets. Liquidity refers to the capital available in order books to take the other side of a trade. While the company cannot conceal how much liquidity is available, critics argue that volume could be artificially increased.
The allegations come as Kalshi competes with Polymarket, which was built on blockchain technology, runs on the polygon network and has an established crypto following. Kalshi appeals more to casual bettors, has Daniel Negreanu as an ambassador and generates an estimated 80% of its volume from sports markets.
Possible post-sports strategy
Kalshi is also fighting state-level challenges over whether its contracts amount to unlicensed sports betting, despite federal efforts to establish a legal framework for prediction markets. If states eventually gain the power to block sports contracts, platforms may need to focus more on weather, culture, business and politics.
Cryptocurrency generates some of the largest non-sports volumes, making perpetual futures potentially important to prediction markets’ future and their ability to attract investors.
Texas lawmakers began examining the issue last week. State Sen. Bob Hall criticised prediction markets, saying gambling was clearly illegal in Texas. Attorney General Ken Paxton has not joined fellow attorneys general seeking federal action. Texas remains a particularly important potential market because of its population and lack of legal sports betting.
