TLDR
- Kalshi says the CFTC has not contacted it about unusual trading in its Ether perpetual futures market.
- The Wall Street Journal reported more than $5 billion in trades of about $5,500 each over the past month.
- The pattern has led to allegations of wash trading, which Kalshi denies.
- The Journal said Kalshi offered some traders equity, fee waivers, and cash payments tied to trading activity.
- Kalshi says the trades come from market maker programs and involve hundreds of distinct traders.
Prediction markets operator Kalshi said it has not been contacted by the Commodity Futures Trading Commission over a burst of trading in its Ether perpetual futures market.
The company also said it does not believe any formal examination is underway. The comments followed a news report that the regulator was reviewing the activity.
On Tuesday, The Wall Street Journal reported that the CFTC was looking at a pattern of rapid trades clustered around $5,500 each. The report cited a person familiar with the matter.
According to the Journal, trades of roughly that size made up more than $5 billion in Ether perpetual futures volume over the past month. The pattern has led to allegations of wash trading.
Kalshi Calls Claims “Rumors Seeded by Competitors”
Elisabeth Diana, head of communications at Kalshi, dismissed the reports as “rumors seeded by competitors.”
“We have not been contacted by the CFTC and don’t believe there is any formal examination,” Diana told Cointelegraph. She added that the data patterns are typical of liquidity incentive programs and common in financial markets.
“Don’t believe everything you read on X,” she said.
Perpetual futures let users bet on the price of an asset without buying it. In this case, the asset is Ether.
Kalshi launched its perpetual futures markets in May. A week later, the company told CNBC that trading volume had passed $1 billion.
Journal Reports Equity Offers and Fee Waivers
The Journal also reported that Kalshi offered some traders the chance to buy equity in the company if they hit trading volume targets. It cited people familiar with the arrangements.
The newspaper said Kalshi waived trading fees and made monthly cash payments to encourage large traders to provide liquidity.
In a blog post on Wednesday, Kalshi said the repeated trade sizes came from programs that pay market makers. These programs require makers to keep buy and sell orders available at set sizes and within a set price range.
The company said the payments reward having orders available, not the number of trades completed. The post did not directly address the reported equity purchase offers.
Market makers quote prices at which they will buy and sell, giving other traders someone to trade with. Traders who accept those prices are called takers.
Kalshi said takers could profit by trading against a market maker’s outdated price when prices moved on other exchanges.
“The fixed size trades are entirely consistent with a single maker putting up resting orders of a fixed size and getting traded against by many takers,” the company said.
Kalshi said hundreds of distinct traders took the maker’s orders. It said the takers were “pretty consistently right” and the maker was “pretty consistently wrong.”
The company said this shows real economic activity. In wash trading, it said, volume rises without either side taking a profit or loss.
