Kalshi responds to wash trading claims over ether perpetual volume

Kalshi has rejected allegations that wash trading inflated activity in its ether perpetual futures market, saying repeated trades identified in public data resulted from its market maker incentive structure rather than coordinated trading.

The response follows analysis showing that a large share of KXETHPERP volume repeatedly traded around similar dollar values, prompting claims that the exchange was artificially boosting volume. 

Kalshi said its internal records show the trades involved hundreds of distinct takers trading against a market maker that consistently posted fixed size orders.

According to Kalshi, its liquidity programs pay market makers to keep bids and offers of a specified size within defined spreads for a set portion of the trading day. The incentives reward resting liquidity rather than trading volume.

Kalshi said this can naturally produce repeated trade sizes. If a market maker continuously posts roughly $5,000 orders, faster traders can repeatedly take those orders whenever prices move elsewhere, creating a pattern of similarly sized transactions.

The exchange also confirmed that self clearing members currently receive rebates equal to their perpetual futures trading fees under a temporary fee holiday introduced in July. 

Kalshi said the program prevents traders from receiving more in rebates than they paid in fees, meaning participants cannot earn money simply by generating additional volume. 

The CFTC lists Kalshi filings covering its perpetual fee rebate program and subsequent updates.

Kalshi further argued that the takers involved in the disputed trades were profitable. In one example analyzed by the exchange, the taker side would have earned roughly $98,000, which Kalshi said is inconsistent with trades entered solely to manufacture volume.

The exchange said self trading is mechanically blocked and coordinated trading between participants is prohibited and monitored. Kalshi said it has found no evidence of collusion or wash trading in the activity under scrutiny.

The explanation goes beyond what can be independently determined from Kalshi’s public trade API, which does not identify counterparties. Kalshi’s claim that hundreds of distinct traders participated therefore relies on information available internally to the exchange. 

The original analysis found repeated trade sizes but could not determine whether the same participants controlled both sides.

Kalshi said more than 350,000 traders have used its perpetual futures markets since launch, while open interest has doubled over the past 30 days. The company introduced US regulated perpetual futures in May and has continued expanding the product into crypto and commodities.