Crypto22 September, 20263 min read
Kalshi Denies CFTC Investigation Amid Scrutiny Of $5,500 Ether Perp Trades
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Kalshi says the CFTC has not contacted it or opened a formal investigation. A single recurring $5,499 ether perpetual trade dominated most volume.
6 outlets told this the same way.
CFTC scrutiny denied
Kalshi said it is not being investigated by the Commodity Futures Trading Commission over its trading activity, and Kalshi spokesperson Elisabeth Diana said, "We have not been contacted by the CFTC and don't believe there is any formal examination." The Wall Street Journal reported that the CFTC was looking at trades on Kalshi before determining whether to open an enforcement investigation, while the agency declined to confirm whether an investigation was underway. CoinDesk reported that a majority of trading volume on Kalshi’s bitcoin and ether perpetual markets was composed of identically-sized trades, with many ether perp trades clustered around $5,500 and bitcoin perp trades around $2,500 or $5,000.
Beni, a co-founder of research firm Stealth Neolab, said Kalshi’s ether perpetual recorded about $539 million in 24-hour volume against just $3.1 million in open interest. Kalshi said it sends data every day to the CFTC and Diana said, "it's not that weird for them to sort of review our data on the regular."
Wash trading questions
The federal government scrutiny centered on unusual trading activity on Kalshi after more than $5 billion worth of ether trades clustered around $5,500 over the past month, according to a Wall Street Journal report cited by the New York Post.
The New York Post described the concern as possible "wash trading" and defined it as transactions in which a single market player simultaneously buys and sells the same asset to create the false impression of market activity.
Kalshi told the New York Post that the trades were genuine and reflected incentives designed to provide liquidity, and Elisabeth Diana said, "We have not been contacted by the CFTC and don't believe there is any formal examination."
CoinDesk found one $5,499 trade size accounting for 57% of sampled ether-perpetual volume from Sept. 17 through Sept. 20, while recurring $2,500 and $5,000 trade sizes made up 54% of sampled bitcoin-perpetual volume over the same period.
CoinDesk reported that trades valued within $2 of $5,499 accounted for $7.7 million, or 57%, of the $13.5 million in transactions it analyzed.
Volume patterns and stakes
CoinDesk reported that recurring fixed-dollar trades appeared on 43 of 46 sampled dates since June, and it said the pattern raised concerns that a small number of participants may be driving much of the market’s reported activity. CoinDesk said Kalshi’s public data does not identify the traders or establish any wrongdoing, and it said the exchange did not explain who produced the repeated trades or why their target values changed. Kalshi also pointed to its systems blocking self-trades and monitoring for coordinated activity, and Kalshi spokesperson Elisabeth Diana said, "We have not been contacted by the CFTC and don't believe there is any formal examination."
The TradingView report said the volume-to-open-interest ratio in Kalshi’s ether perpetual market has reached as high as 174x, and it described that a ratio that high means the dollar amount changing hands dwarfs the actual positions being held. Kalshi launched crypto perps on June 3 after the CFTC approved its BTCPERP contract on May 29, and the products cleared $5.5 billion of volume in their first two weeks, according to Unchainedcrypto.