Kalshi claims the CFTC has not reached out to the prediction market and is not probing its trading activity. The firm attributes any unusual patterns in its ether perpetual market to its liquidity incentive program.
“We have not been contacted by the CFTC and don’t believe there is any formal examination,” Kalshi spokesperson Elisabeth Diana said in a statement. “As we’ve said, these data patterns are typical of liquidity incentive programs and common in financial markets.”
The Data Patterns
On Tuesday morning, CoinDesk reported that a majority of the trading volume on Kalshi’s perpetual markets for bitcoin and ether was made up of identically sized trades. The report found that many ether perp trades were grouped around $5,500, while bitcoin perp trades tended to cluster around either $2,500 or $5,000.
On Tuesday, the Wall Street Journal followed with its own report, which added that the CFTC was looking into trading activity on Kalshi following nearly one million trades in an ether market placed in similar amounts. The agency was reviewing the data before deciding whether to open an enforcement investigation.
Beni’s Numbers
Questions about Kalshi’s trading activity emerged after Beni, a co-founder of research firm Stealth Neolab, flagged unusual figures in the ether perpetual market. He said Kalshi’s ether perpetual recorded about $539 million in 24-hour volume against just $3.1 million in open interest.
Later, Beni discovered that trades of exactly $5,500 accounted for 48% to 58% of notional volume across four days in September. These figures were drawn from Kalshi’s public API.
Diana’s Explanation
Kalshi’s liquidity incentive program, which rewards participants for providing liquidity, is what Diana says explains the patterns.
“We send our data every day to them [the CFTC], and it’s not that weird for them to sort of review our data on the regular,” Diana said in an interview.
Kalshi has said that these incentives help explain trading patterns that have drawn notice, including sudden rushes of trades of roughly equal size.
The Surveillance Team
Asked about protections against wash trading and self-trading, Diana said Kalshi has “tons of tools” and a “full surveillance team in place.” Wash trading involves transactions designed to create the appearance of market activity without a genuine change in economic exposure.
The Social Media Pushback
Diana disputed speculation circulating on social media about the exchange.
“Don’t believe everything you read on X,” she said. “A lot of the discourse was rumors seeded by competitors.”
What Is Actually Known
- Kalshi says the CFTC has not contacted it and does not believe the regulator has opened a formal examination.
- The CFTC declined to confirm whether an investigation was underway.
- Nearly one million trades in an ether market were placed in similar amounts.
- Trades of exactly $5,500 made up 48% to 58% of notional volume on four days in September.
- Kalshi sends its data daily to the CFTC.
The Regulator’s Review
The growth of prediction markets has brought more scrutiny to how platforms report trading volume and manage activity between participants. Liquidity incentive programs usually reward market participants for placing orders, which helps build markets where other customers can buy or sell.
The CFTC had not returned a request for comment sent Tuesday.
Two claims underpin Kalshi’s current standing: the CFTC has not reached out to it, and its trading activity fits what would be expected from a liquidity incentive program. Both can be examined through testing, though neither resolves the larger issue of whether the regulator is examining the data at all.
Diana called the company’s daily transmission of data to the CFTC routine, but it remains unknown whether the regulator’s review amounts to standard practice or a move toward enforcement.
Beni flagged the repeated trades because they are an uncommon occurrence, and the 48% to 58% figure represents a large portion of total volume. Kalshi offers a reasonable explanation, saying that liquidity incentives reward participants for placing orders. That rationale, however, fails to account for why those orders tend to cluster at particular dollar amounts.
The CFTC’s decision on whether to open an enforcement investigation remains pending. Until then, Kalshi’s position is that it is not under investigation and that its trading data is routine.
Kalshi’s surveillance team and its tools are in place, and Diana’s dismissal of competitor rumors on X suggests the company believes the speculation is noise. Whether the CFTC sees the same data as routine or as evidence of something worth investigating is the question that remains unanswered.
Source material: “Kalshi says it is not being investigated by the CFTC over trading activity,” CoinDesk.
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