Kalshi defends itself against wash trading allegations

Prediction market platform Kalshi is under fire following accusations by a former quant trader about fake trading volumes on the crypto division of the platform. A Kalshi employee now responds publicly and rejects the allegations, but the accusing party says it now has new non-public information.

In brief:

• Quant trader Beni claims that Kalshi’s trading volumes on ETH-PERP are incorrect, given the ratio between volume and open interest.
• Kalshi denies the allegations and compares its market maker programme with that of CME, Binance and Hyperliquid.
• Beni says he has received new non-public information and wants to come back to it after consulting a lawyer.

Suspicious ratio between volume and open interest

The discussion was prompted by a remark from Beni, co-founder of Stealth Neolab and a former quant trader. He pointed out that the 24-hour volume on Kalshi’s ETH-PERP contract was around $539 million, while open interest stood at only around $3.1 million. For many market analysts, that ratio is an indication of wash trading, in which parties trade with themselves to generate artificial volume.

Beni also questioned the way Kalshi calculates and presents its volumes, and suggested that the market makers on the platform are selected by Kalshi itself.

Kalshi: comparison is flawed and programme is public

IcoBeast, Kalshi’s head of crypto, responds via X and states that Beni is confusing two different things. According to IcoBeast, the chart Beni refers to shows market share in prediction markets, not in perpetual futures. According to him, Kalshi does not offer rebates for crypto prediction markets.

On the allegation about selected market makers, IcoBeast says that anyone can independently become a member of a CFTC-regulated exchange, as long as the legal requirements are met. “Fair access is a regulatory requirement for us,” he writes.

IcoBeast further compares Kalshi’s rewards programme with comparable programmes at CME, Binance and Hyperliquid. Both exchanges even apply negative maker rebates, which means that market makers receive a rebate instead of paying fees. Screenshots from the Binance Liquidity Program show that the highest-tier market makers there receive a rebate of -5% on USDT-M contracts. At Hyperliquid, that rises to -3% for the highest tier.

According to IcoBeast, an important difference with offshore exchanges is that Kalshi, as a regulated US exchange, must publicly file its incentive programmes. “What you see is what you get,” says IcoBeast, who acknowledges that Kalshi’s offering of perpetual futures is still at an early stage.

Shortly after IcoBeast’s response, Beni said that he had received new non-public information and would say more about it after consulting a lawyer. It is still unclear what that information relates to.