Derivatives
Kalshi Ends Volume Incentive Program Amid CFTC Scrutiny and Prepares for $1 Billion Raise
Kalshi, the prediction-market operator, is set to end its Volume Incentive Program nearly a year ahead of schedule, following increased scrutiny of trading activities in its crypto markets. The decision was communicated to the Commodity Futures Trading Commission (CFTC) in a filing dated September 28, with the program's termination effective no earlier than October 13. Initially slated to run until October 1, 2027, this early termination raises questions about the trading patterns observed in Kalshi's markets.
The CFTC has reportedly been examining trading activities after researchers noted repetitive trades around fixed dollar amounts, particularly in Ethereum perpetuals. Kalshi has denied any wrongdoing, asserting that the repetitive trades stem from market makers placing fixed-size quotes. The filing did not explicitly connect the program's early end to these concerns, although it grants Kalshi discretion to terminate the program as needed.
In place of the Volume Incentive Program, Kalshi has proposed a new Deposit and Trading Reward Incentive Program to the CFTC, which allows for more targeted promotions based on various trader criteria. This new framework enables Kalshi to offer time-limited promotions linked to deposits and trading activity, with potential rewards reaching up to $2,500 per participant.
Despite these changes, Kalshi has been experiencing record trading volumes, handling $3.24 billion on September 27 alone, and achieving a weekly volume of $15.66 billion. The exchange's share of tracked prediction-market volume has surged to nearly 80% compared to the previous year.
In conjunction with these developments, Kalshi is nearing a $1 billion funding round that could value the company at approximately $40 billion, with major investors such as Sequoia Capital and Wellington Management involved. This funding round is anticipated to be the last before a potential IPO, which could occur as early as 2027.
FAQ
What is the Volume Incentive Program that Kalshi is ending?
The Volume Incentive Program was designed to incentivize trading on Kalshi's platform by offering rewards based on trading volume. It was initially set to run until October 1, 2027, but is being terminated early due to increased scrutiny from the CFTC.
Why is Kalshi ending the Volume Incentive Program early?
Kalshi is ending the program amid scrutiny from the Commodity Futures Trading Commission (CFTC) regarding trading activities in its crypto markets, particularly concerning repetitive trades around fixed dollar amounts.
What will replace the Volume Incentive Program?
Kalshi has proposed a new Deposit and Trading Reward Incentive Program, which allows for targeted promotions based on various trader criteria and offers potential rewards of up to $2,500 per participant.
How has Kalshi's trading volume been affected by these changes?
Despite the changes, Kalshi has experienced record trading volumes, handling $3.24 billion on September 27 alone and achieving a weekly volume of $15.66 billion, with a market share of nearly 80% in tracked prediction-market volume.
What is the significance of Kalshi's upcoming funding round?
Kalshi is nearing a $1 billion funding round that could value the company at approximately $40 billion, with major investors involved. This funding round is expected to be the last before a potential IPO, which could occur as early as 2027.