Kalshi files to end volume rewards as wash-trading questions mount

Kalshi has told the CFTC it will shut down its Volume Incentive Program no earlier than October 13. 

Meanwhile, the Commodity Futures Trading Commission (CFTC) is reviewing more than $5 billion in near-identical Ether perpetual trades on the exchange. 

What is Kalshi shutting down?

Kalshi told the U.S. Commodity Futures Trading Commission on September 28 that it plans to close its Volume Incentive Program, which pays eligible traders out of a fixed reward pool based on their share of qualifying volume in a given market, on or after October 13. 

Kalshi first registered the incentive program with the CFTC in February 2023 and it began operating in March. The platform said the program was a way to lift trading activity and liquidity on its central limit order book. 

Kalshi’s filing with the CFTC does not give a reason for the shutdown. 

Under the incentive program, rewards only apply to trades priced between $0.03 and $0.97, and do not apply to perpetual futures. Reward periods only last 31 days, and event-contract payouts are capped at half a cent per contract per participant.

Ending this program does not clear out every incentive Kalshi has on file. The CFTC database separately lists a Deposit and Trading Reward Incentive Program that Kalshi submitted on September 25, that is currently going through a 10-day review.

Why do people think the trading on Kalshi is fake? 

A CoinDesk review of the Kalshi’s public trade records, published September 22, found that a small cluster of repeating trade sizes drove more than half the value on its bitcoin and ether perpetual markets. 

On ether, trades within $2 of $5,499 made up $7.7 million, or 57%, of the $13.5 million CoinDesk sampled between September 17 and September 20. Bitcoin showed a similar pattern, with recurring $2,500 and $5,000 trades accounting for 54% of the sampled activity.

CoinDesk said the trades may have been made by bots placing orders of the same size over and over again. The pattern appeared in 43 of 46 hourly samples that were taken, dating back to June 19. 

A pseudonymous analyst named Beni, who is a co-founder of research firm Stealth Neolab, flagged the pattern first, citing about $539 million in 24-hour ether-perpetual volume against roughly $3.1 million in open interest. 

The CFTC was later reported to be examining the trades, with more than $5 billion in ether-perpetual volume tied to the repeated sizes over roughly a month. 

Kalshi rejected the wash-trading claims outright in a September 22 blog post, in which the company wrote that “wash trading does not occur on Kalshi.” 

The company says that self-matching is mechanically blocked, and coordinated wash trading is banned and surveilled. It explained that the repeated patterns are due to its market-maker arrangements. Firms are paid a flat fee to keep resting bid and ask orders on the book, and faster traders repeatedly hit those quotes.

Elisabeth Diana, a spokesperson for the company, stated as of September 23 that the CFTC had not contacted Kalshi. She also said that the company did not think a formal examination was open and added that this kind of pattern is normal in programs that pay for liquidity.

Notably, a Columbia University study last year estimated that nearly 25% of Polymarket’s volume over the past three years was wash trading. However, in that instance, Polymarket was not accused of complicity.

Will Kalshi be valued at $40 billion?

Despite the allegations, September has been Kalshi’s biggest month on record. The Block’s data dashboard put volume at $52.98 billion through September 29, an all-time high that is already more than the $38.67 billion recorded in August despite the fact that September is not yet over. 

In July, Kalshi supplied roughly $37.7 billion of the $50.6 billion logged across Kalshi, Polymarket and Polymarket U.S.

Kalshi is also currently in advanced talks to raise about $1 billion at a valuation near $40 billion, with Sequoia Capital and Wellington Management weighing the lead and Tiger Global and Dragoneer among possible participants. 

Such a deal would roughly double the $22 billion valuation Kalshi carried after its May 2026 round. Cathie Wood’s Ark Invest, meanwhile, said it now holds Kalshi exposure across its ARKK, ARKW and ARKF funds.

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