Prediction markets operator Kalshi said it has not been contacted by the Commodity Futures Trading Commission and does not believe there is any formal examination, after reports emerged that the regulator was reviewing trading activity in its Ether perpetual futures market.
The Wall Street Journal reported that the CFTC is examining a pattern of rapid trades clustered around $5,500 in the market. The trading pattern prompted allegations of wash trading, a practice where trades are executed without genuine economic intent to create the appearance of market activity.
Company Response
Elisabeth Diana, head of communications at Kalshi, told Cointelegraph: "We have not been contacted by the CFTC and don't believe there is any formal examination." Diana described the discourse surrounding the matter as "rumors seeded by competitors."
According to the Journal, trades of roughly $5,500 each accounted for over $5 billion in Ether perpetual futures volume over the past month. The Journal also reported that Kalshi offered some traders opportunities to buy equity in the company if they met trading-volume targets, waived trading fees, and provided monthly cash payments to encourage large traders to provide liquidity.
Kalshi's Explanation
In a blog post, Kalshi attributed the repeated trade sizes to liquidity incentive programs that pay market makers to keep buy and sell orders available at specified sizes and price ranges. The company said such payments reward the availability of orders rather than the volume of trades executed.
Kalshi stated that the fixed-size trades were consistent with market makers placing resting orders that are traded against by multiple takers. The company said the trades involved hundreds of distinct traders and noted that takers were "pretty consistently right" while the maker was "pretty consistently wrong," which it described as "a sign of genuine economic activity rather than wash" trading.
Kalshi's perpetual futures markets launched in May, with the company reporting to CNBC that trading volume had surpassed $1 billion within a week of launch.
