Kalshi Faces Wash Trading Allegations Over Crypto Volume

Kalshi, a crypto derivatives exchange, is facing allegations of wash trading after trader Beni pointed out an unusually high volume in its Ethereum perpetual (ETH-PERP) market. According to Beni's calculations, the ETH-PERP volume reached $538.6 million in 24 hours, while the open interest stood at approximately $3.1 million. This resulted in a ratio of around 174 times, which Beni claimed was unusually large compared to other exchanges.

Kalshi's crypto lead, IcoBeast, disputed Beni's claims and argued that the exchange operates two separate products: prediction markets and perpetual futures. He stated that the Artemis chart cited by Beni actually showed prediction market volume share, not perps. IcoBeast also pointed out that Kalshi does not operate a rebate program for its crypto prediction markets.

The controversy surrounding Kalshi's ETH-PERP market has sparked debate about the exchange's incentives and potential manipulation risks. In response to the allegations, Kalshi submitted a filing to the Commodity Futures Trading Commission (CFTC) in September, which outlined its temporary perpetual fee rebate program. The program allows eligible participants to receive rebates on their trades, but excludes suspected wash trades, self-matching, and pre-arranged trades from receiving rebates.