Kalshi Addresses Wash Trading Allegations in Ether Perpetual Futures Market

Kalshi has rejected allegations of wash trading that purportedly inflated activity in its ether perpetual futures market. The exchange stated that repeated trades identified in public data were a result of its market maker incentive structure, not coordinated trading.

The response comes after an analysis suggested that a significant portion of KXETHPERP volume involved trades at similar dollar values, leading to claims of artificially boosted volume. Kalshi clarified that its internal records indicate hundreds of distinct takers engaged in trading against a market maker that consistently posted fixed-size orders.

According to Kalshi, its liquidity programs incentivize market makers to maintain bids and offers of specified sizes within defined spreads for a portion of the trading day. This setup rewards resting liquidity rather than trading volume, which can lead to repeated trade sizes. For instance, if a market maker continuously posts orders of approximately $5,000, faster traders can repeatedly take those orders as prices fluctuate, resulting in a pattern of similarly sized transactions.

Additionally, Kalshi confirmed that self-clearing members currently benefit from a temporary fee holiday introduced in July, receiving rebates equal to their perpetual futures trading fees. This program ensures that traders cannot earn more in rebates than they paid in fees, preventing profit generation solely through increased volume.

The exchange further argued that the takers involved in the disputed trades were profitable, with one example indicating a potential earnings of around $98,000, which contradicts the notion of trades being executed solely to inflate volume. Kalshi emphasized that self-trading is mechanically blocked and that coordinated trading between participants is prohibited and monitored.

Kalshi stated it has found no evidence of collusion or wash trading in the scrutinized activity. The exchange's claims about the participation of hundreds of distinct traders rely on internal information, as its public trade API does not disclose counterparties. Since the launch of its perpetual futures markets, over 350,000 traders have engaged, with open interest doubling in the past month.