The Commodity Futures Trading Commission (CFTC) is reviewing unusual trading activity on Kalshi's Ethereum perpetual futures market, according to reporting by The Wall Street Journal. The investigation centers on close to one million trades clustered around the same $5,500 order size since August, which the WSJ said accounted for more than $5 billion in volume.
More than a third of trades in the market over recent weeks have clustered around that $5,500 figure. The CFTC is currently reviewing the activity before deciding whether to open a formal enforcement investigation.
Kalshi's Response
Kalshi denies allegations of wash trading—the practice of making trades with no real economic purpose to create misleading activity. The company argues that the repeated order sizes reflect ordinary market-making activity, with hundreds of distinct traders participating in the market.
According to Kalshi, the clustering pattern stems from market makers holding fixed resting orders that faster traders repeatedly hit. The company stated that self-trading is mechanically blocked, coordinated wash trading is barred and monitored, and its liquidity programs pay market makers for holding orders at set sizes and spreads rather than for raw volume.
Jump Trading and Wintermute were identified as among the firms involved in the rapid trades. Jump Trading said it trades for its own profit and uses self-match prevention tools, and insisted that it does not coordinate activity with other traders.
Regulatory Context
The CFTC scrutiny comes as Kalshi expands its perpetual futures business, which it opened to crypto in May and is now attempting to extend to contracts tied to individual US stocks. The platform is currently facing legal challenges on multiple fronts, including a lawsuit filed by Baltimore in August over allegedly offering unlicensed sports betting, and prior action by New York's Attorney General seeking to shut down the firm's operations in the state.
Kalshi has demonstrated enforcement of its own rules, banning former Congressman George Santos for life with a $71,356 penalty after he traded on whether he would attend the State of the Union, and previously banning three political candidates for five years each after they bet on their own races.
