CFTC scrutinizes Kalshi after $5B in near identical ether perp trades: WSJ

The Commodity Futures Trading Commission is examining unusual trading activity on Kalshi after nearly one million ether perpetual futures trades occurred in almost identical amounts, according to The Wall Street Journal.

More than one third of trades in the market in recent weeks were clustered around $5,500, with the pattern accounting for more than $5 billion in ether perpetual volume over the past month, according to the Journal’s analysis of public data.

The CFTC is reviewing the activity before determining whether to open an enforcement investigation, according to a person familiar with the matter cited by the Journal. The agency said it could not comment on whether an investigation is underway.

The pattern has prompted allegations of wash trading, which involves trades lacking genuine economic purpose that can create a misleading impression of market activity. Kalshi has denied the allegations.

The company said hundreds of distinct traders participated in the transactions and argued that the repeated sizes resulted from market makers maintaining fixed resting orders that were repeatedly hit by faster traders.

Kalshi said self trading is mechanically blocked and coordinated wash trading is prohibited and monitored.

Kalshi also said its liquidity programs compensate market makers for maintaining orders at specific sizes and spreads rather than rewarding trading volume.

A temporary program also refunds trading fees for qualifying self clearing members but does not allow traders to receive more in rebates than they paid in fees.

According to the Journal, Jump Trading and Wintermute were among firms involved in the rapid transactions. Jump said it trades for profit, uses self match prevention tools and does not coordinate its activity with other traders.

The scrutiny comes as Kalshi expands its perpetual futures business. The company launched crypto perps in May and has since sought regulatory approval to offer similar contracts tied to individual US stocks.