Kalshi Denies Wash Trading Allegations Citing Liquidity Incentives

Kalshi has been accused of exaggerating its crypto perps volume by allowing wash trading. However, an analysis of the trades shows that they were profitable for the taker and consistent with a single maker putting up resting orders of a fixed size and getting traded against by many takers.

The Perpetuals platform on Kalshi has market maker programs that use liquidity incentives to encourage traders to provide liquidity. These programs are available to any trader who meets the requirements, including providing bid and ask orders of a certain size with a small spread. The purpose of these programs is to ensure that participants can enter and exit positions at fair values.

Professional trading firms like Bank Street Trading tend to trade perpetuals as Self-Clearing Members instead of through a broker. Kalshi benefits from having a wider base of Self-Clearing Members for risk-management reasons. The exchange has initiated a temporary fee rebate program for Self-Clearing Members, which matches their trading fees paid on perpetual futures trades.

An analysis of the trades shows that the aggressor had an edge and was profitable. The trades of the same size kept reappearing in the trade log, consistent with a single maker putting up resting orders of a fixed size and getting traded against by many takers.