Kalshi disputes scrutiny over Ether futures trading activity

Traders Union
All News
Crypto
Kalshi and Ether futures scrutiny

Highlights

Over $5 billion in Ether perpetual futures volume on Kalshi last month included rapid $5,500 trades under regulatory scrutiny for potential wash trading, according to The Wall Street Journal.
Kalshi attributes the trading pattern to liquidity incentive programs, including fee waivers and equity offers for high-volume traders, and denies any regulatory contact or wrongdoing.
The company asserts that hundreds of distinct traders exploited stale quotes, contributing to over $1 billion in volume within a week of launch in May, signaling fast growth in its perpetual futures segment.

Ether futures activity and regulatory questions

As reported by Cointelegraph, citing The Wall Street Journal, the CFTC is examining a pattern of rapid trades clustered around $5,500 in Kalshi's Ether perpetual futures market, citing a person familiar with the matter. The reported activity has sparked allegations of wash trading as volume in the product expands.

Kalshi says the trading pattern reflects liquidity incentive programs that are common in financial markets. Elisabeth Diana, head of communications at Kalshi, told Cointelegraph the discussion amounts to "rumors seeded by competitors" and said the company has not been contacted by the regulator.

The trades took place in a perpetual futures market tied to Ether, where users speculate on price moves without owning the asset itself. According to the Journal, trades of roughly $5,500 each accounted for more than $5 billion in Ether perpetual futures volume over the past month.

The Journal also said Kalshi offered some traders a chance to buy equity in the company if they met trading-volume targets, while also waiving fees and providing monthly cash payments to encourage large traders to supply liquidity. Kalshi's Wednesday blog post explained the repeated trade sizes as part of programs that pay market makers to maintain buy and sell orders at set sizes and price ranges, but it did not directly address the reported equity-purchase arrangements.

Liquidity incentives and market impact

Kalshi says the trades involved market makers posting fixed-size resting orders and many separate traders, known as takers, trading against them. The company argues this pattern is consistent with genuine market activity because takers were often profitable while the market maker was often on the losing side.

In its blog post, Kalshi said that wash trading would be more likely to raise volume without either side showing meaningful profit or loss. It said the activity instead reflects hundreds of distinct traders exploiting stale quotes when prices moved on other exchanges.

The issue surfaces as Kalshi continues to build out its perpetual futures business. A week after launching the product in May, the company told CNBC that trading volume had already surpassed $1 billion, highlighting how quickly the segment is becoming a visible part of the broader digital-asset derivatives market.

In our earlier article on Kalshi’s push toward leveraged prediction-market trading, we explained how moving from fully funded binary event contracts to futures-like products would require margining, tighter collateral controls, and stronger market supervision. We also noted that as platforms increase leverage and trading intensity, they can face regulatory expectations closer to mainstream derivatives venues, including heightened focus on oversight and potential market-manipulation risks.

This material may contain third-party opinions, none of the data and information on this webpage constitutes investment advice according to our Disclaimer. While we adhere to strict Editorial Integrity, this post may contain references to products from our partners.