Kalshi Reports $5 Billion in Ether Trades Linked to Liquidity Programs
Kalshi states that $5 billion in similar-sized Ether trades resulted from liquidity incentives, not wash trading, despite regulatory scrutiny.
Key points
- Kalshi states that nearly $5 billion in Ether perpetual trades resulted from its liquidity incentive programs.
- The company denies wash trading claims, noting that hundreds of distinct traders took fixed-size orders from a maker.
- Kalshi confirms that the CFTC has not contacted the firm and that no formal examination has begun.
Kalshi reports that nearly $5 billion in Ether perpetual trades occurred over the past month. The company says this activity stems from its liquidity incentive programs. It denies that the trades constitute wash trading. Kalshi states the Commodity Futures Trading Commission has not contacted them.
The Wall Street Journal reported that the regulator is reviewing rapid trades clustered around $5,500. Kalshi launched its perpetual futures markets in May. Trading volume surpassed $1 billion within a week of that launch. The company describes the current scrutiny as rumors seeded by competitors.
Liquidity incentives drive trade size
Kalshi pays market makers to keep buy and sell orders available. These orders must be at specified sizes and within a set price range. The payments reward the availability of orders rather than executed volume. This structure creates the repeated trade sizes seen in the data.
The Journal noted that Kalshi offered equity opportunities to traders. This offer was tied to meeting specific trading-volume targets. The company also waived trading fees for large traders. It provided monthly cash payments to encourage them to provide liquidity.
Company rejects wash trading allegations
Kalshi explains that market makers quote prices for buying and selling assets. Takers accept these quotes to trade with the maker. Profit is made on the difference between buying and selling prices. Losses occur if prices move against the maker’s position.
The company says hundreds of distinct traders took the maker’s fixed-size orders. These takers were consistently right, while the maker was consistently wrong. This outcome indicates genuine economic activity rather than artificial volume generation. Wash trading would show volume increases without profit or loss for either side.
Regulator has not initiated formal review
Elisabeth Diana, head of communications at Kalshi, spoke to Cointelegraph. She stated that the company has not been contacted by the CFTC. Kalshi does not believe any formal examination is currently underway. Diana advised the public not to believe everything read on social media.
