CFTC Scrutinizes $5B in Nearly Identical Ether Perp Trades on Kalshi: WSJ Report

Summary

• The CFTC is reviewing nearly one million similarly sized Kalshi ether trades, which generated more than $5 billion in volume.
• Kalshi attributes repeated trade sizes to market maker orders and says its safeguards prohibit self-trading and coordinated wash trading.
• An August CFTC order kept Kalshi operating amid New York’s lawsuit, while regulators now examine activity in its ether market.

The CFTC is reviewing nearly one million similarly sized ether perpetual futures trades on Kalshi. According to The Wall Street Journal, the trades generated more than $5 billion in volume over the past month.

More than one third of recent trades in a single Kalshi market clustered around $5,500, raising questions about whether the volume reflected genuine activity. The CFTC is reviewing the pattern before deciding whether to investigate, according to the Journal, but has declined to comment or announce any finding of misconduct.

Some traders have alleged wash trading, which involves transactions without a genuine economic purpose. Such trades can give a misleading impression of market activity. Kalshi denies the allegations and offers a different explanation for the repeated amounts.

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Kalshi Explains the Repeated Ether Trade Sizes

According to Kalshi, hundreds of distinct traders participated in the transactions. Kalshi argues that faster traders repeatedly filled market makers’ fixed-size orders, producing many trades of nearly identical value.

Kalshi says its systems prevent traders from matching their own orders, while the company prohibits coordinated wash trading and monitors for violations. According to Kalshi, its liquidity programs pay market makers to maintain orders at specified sizes and spreads, regardless of trading volume.

A temporary program refunds fees to qualifying members that clear their own trades, although Kalshi says rebates cannot exceed fees paid. The Journal identified Jump Trading and Wintermute among the firms involved, while Jump says it trades independently for profit and prevents self-matching.

August Order Shows a Separate CFTC Dispute Involving Kalshi

The ether trading review follows a separate dispute in August over whether New York could restrict Kalshi’s event contracts. On August 11, the CFTC used emergency authority to order Kalshi to keep operating under federal market rules.

New York Attorney General Letitia James sued Kalshi in July, seeking to block its event contracts and recover more than $36 billion. CFTC Chair Michael Selig argued that federal law governs interstate derivatives markets, while the current review concerns trading in Kalshi’s ether market.

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