The federal government is scrutinizing unusual trading activity on Kalshi after billions of dollars worth of near-identical crypto trades raised questions about possible “wash trading,” according to a report.
The Commodity Futures Trading Commission is examining the trades before determining whether to open an enforcement investigation, the Wall Street Journal reported, citing a person familiar with the matter.
The scrutiny comes after more than $5 billion worth of ether trades clustered around $5,500 over the past month, according to the Journal.
The activity has fueled questions about possible “wash trading” — transactions in which a single market player simultaneously buys and sells the same asset to create the false impression of market activity.
Kalshi has denied finding evidence of wash trading, telling the Journal that the trades were genuine and reflected incentives designed to provide liquidity in its fledgling perpetual-futures markets.
The company has also said wash trading is explicitly prohibited under its rules.
“We have not been contacted by the CFTC and don’t believe there is any formal examination,” Elisabeth Diana, a spokesperson for Kalshi, told The Post.
“As we’ve said, these data patterns are typical of liquidity incentive programs and common in financial markets. Don’t believe everything you read on X, a lot of the discourse was rumors seeded by competitors.”
Meanwhile, a Sept. 21 working paper posted online by an author using the name “OctopusTakopi” alleged that unusual trading patterns on Kalshi’s perpetual futures markets showed characteristics associated with wash trading.
The paper analyzed 4.1 million publicly reported Kalshi trades worth roughly $11.5 billion between Sept. 5 and Sept. 18, comparing them with hundreds of millions of trades on Binance, Bybit and Hyperliquid.
It found that about half of Kalshi’s perpetual futures volume during the period was concentrated in a handful of repetitive, fixed-dollar trade sizes.
The researcher also identified similarly concentrated activity in Kalshi’s bitcoin market, where trades of roughly $5,000 and $2,500 accounted for 57% of volume.
Together, those three clusters represented about $5.87 billion — or 51% of the $11.5 billion in Kalshi perpetual futures volume analyzed by the researchers.
Similar fixed-dollar trading patterns appeared in 17 of the 20 Kalshi perpetual contracts that traded during the period, according to the paper.
The researchers said the pattern dates back to shortly after Kalshi launched the contracts in June.
In one particularly unusual episode, the researchers found that the dominant trade sizes in Kalshi’s bitcoin and ether markets changed almost simultaneously on Aug. 24.
Bitcoin trades shifted from roughly $4,000 and $2,100 to $5,000 and $2,500, while the dominant ether size changed from roughly $4,500 to $5,500.
The changes occurred within about 10 seconds of one another, according to timestamps analyzed in the paper.
The author wrote in the paper that the synchronized switch was consistent with a single operator changing trading parameters across both markets, though the publicly available data do not reveal trader identities and therefore cannot establish who was responsible.