In the regulated prediction-market platform Kalabi launched a suite of perpetual futures contracts, allowing users to bet on the price movements of assets such as Bitcoin and Ether without ever holding the underlying crypto. Within a week, the new markets generated more than $1 billion in trading volume, signalling rapid uptake among U.S. traders who could access the products with dollars and without crypto wallets.
Shortly after, a cluster of trades repeatedly sized at $5,500 in the Ether perpetual market attracted scrutiny. The pattern involved nearly a million nearly identical transactions, accounting for more than $5 billion of notional volume in a single month. Some observers interpreted the homogeneity as a possible case of wash trading—the practice of moving assets back and forth between colluding parties to inflate volume without real risk.
Rumors of a CFTC examination
Speculation intensified when a regulatory body was said to be reviewing the activity. Kalshi’s head of communications, Elisabeth Diana responded firmly: “We have not been contacted by the CFTC and don’t believe there is any formal examination.” She added that the chatter was “rumors seeded by competitors” and warned readers not to trust every post on X.
The agency in question, the Commodity Futures Trading Commission declined to comment on whether it had formally opened an investigation. Kalshi noted that it routinely sends daily data to the regulator, making routine data review a normal part of compliance rather than evidence of a targeted probe.
What the $5,500 trades really are
Kalshi’s technical blog attributes the uniform trade size to its liquidity incentive program. The exchange pays selected market makers to maintain resting orders of a predetermined size within a specific price band. When many takers execute against those orders, each fill naturally mirrors the posted size—hence the prevalence of $5,500 blocks.
According to the company, the incentive rewards are tied to the *presence* of orders, not the *volume* actually traded. Market makers earn compensation for keeping sizable buy and sell quotes on the book, thereby providing a ready counter-party for ordinary traders. In practice, when a market maker’s order is snapped up by a taker, the trade reflects the exact amount the maker had advertised, producing the observed clustering.
Kalshi also disclosed that it waives fees for high-volume participants and offers monthly cash payments to encourage liquidity provision. Although the firm mentioned an equity-purchase opportunity for traders who meet volume targets, the blog post did not elaborate on that specific mechanism.
Why the pattern does not equal wash trading
In a statement, Kalshi explained that the observed behavior is a hallmark of genuine market activity. “The fixed size trades are entirely consistent with a single maker putting up resting orders of a fixed size and getting traded against by many takers” the company said. It further noted that hundreds of distinct traders acted as takers, with the majority “pretty consistently right” while the market maker was “pretty consistently wrong.” Such a dynamic, the firm argues, reflects real profit-and-loss outcomes, contrary to the artificial nature of wash trades where both sides break even.
The company’s surveillance team, described as “having tons of tools,” monitors for self-trading and other manipulative practices. While the regulator’s review remains unconfirmed, Kalshi’s position is that the data patterns are typical of incentive-driven markets and common across financial venues.
Analysts outside the firm have pointed out that similar trade-size clustering does not appear on comparable perpetual futures markets elsewhere, bolstering Kalshi’s claim that the effect stems from its own program design rather than coordinated collusion.
Ultimately, the episode underscores how incentive structures can produce striking statistical signatures that look suspicious at first glance. For Kalshi, the $5,500 trade blocks are a byproduct of rewarding market makers for posting tight spreads and sizable liquidity, not an attempt to fabricate activity.
