Feds scrutinize $5B in unusual Kalshi trades amid wash trading concerns

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...