Kalshi Denies Faking Its Crypto Volume, Blames Pattern on One Market Maker

Kalshi denies faking its crypto trading volume

Kalshi, a regulated exchange, denied faking its crypto trading volume after traders accused it of wash trading over the weekend. The accusation came after a repeating trade size appeared in its public data for ether perpetual futures, a type of crypto contract that lets traders bet on price changes without owning the underlying asset.

In a response published Monday, Kalshi attributed the pattern to a single market maker – a firm that provides liquidity by posting buy and sell orders – which it pays to keep orders on the book. The exchange said that market maker was losing money to faster traders.

Key numbers behind the dispute

• A measurement by The Defiant found that a single trade size appeared in 47.2% of ether perpetual trades and 62.75% of notional value across 120,000 consecutive trades on Sept. 20 and 21.
• Kalshi stated that the trades were taken by hundreds of distinct participants who were faster than the market maker.
• The exchange disclosed that it has contributed $40 million of its own capital to the Guaranty Fund backing the perpetuals exchange.
• At 16:39 UTC on Sept. 22, Kalshi's ether perpetual showed $644.5 million in 24-hour notional volume against $8.6 million in open interest, a ratio of 75.1.
• Kalshi's 25 listed perpetual contracts cleared more than $1.5 billion in notional over 24 hours.

What Kalshi says about the trades

Kalshi said in its post, "All the trades that were shared on X this weekend are trades that both sides wanted to take at the time, because they disagreed on the fair price." It added that one side – the takers – was "pretty consistently right," while the maker was "pretty consistently wrong."

The exchange argued that this profit direction rules out wash trading, which is when traders trade with themselves to inflate volume without real economic activity. "This is a sign of genuine economic activity rather than wash," it said.

On the repeating trade size, Kalshi explained that fixed-size orders are consistent with a single maker putting up resting orders of a fixed size and getting traded against by many takers. It said self-trading is "mechanically blocked" and pre-arranged trading is "surveilled for and banned," adding: "We are regulated. We know who is trading. We've seen no evidence of collusion or wash trades."

How Kalshi pays for liquidity

Kalshi described its liquidity payment program with a hypothetical example: "Kalshi will pay Bank Street Trading $100k a month if Bank Street Trading has bid and ask orders resting on the book of size (at least) $5,000, (no more than) 0.1% apart. These orders must be resting on the book (at least) 95% of every hour." The $5,000 resting size in the example is close to the $5,425 clip measured by The Defiant.

Kalshi said these programs pay for resting liquidity, not for volume traded. "These structures do not provide an incentive for traders to wash trade because they do not reward volume traded, just resting liquidity provided."

Fee program details

Kalshi confirmed that Self-Clearing Members currently pay nothing to trade perpetuals. Its Temporary Perpetual Fee Rebate Program, self-certified with the CFTC on June 24 and effective from July 9, returns all net taker and maker fees from eligible markets. A clause caps combined incentive payments at the fees a participant paid, preventing a net payment for trading.

The exchange also addressed a Sept. 2 filing that would set crypto perpetual taker fees at 0.3 basis points and leave makers netting 0.3 basis points. Kalshi said, "This program is not live, and in any case would require a public exchange notice were it to take effect." The filing states it takes effect on exchange notice, no earlier than 5 p.m. ET on Sept. 16.

Volume counting method

Kalshi said it counts notional value, so a contract bought at 3 cents adds $1 to reported volume. It explained that "a 3c trade on YES necessarily has a 97c trade on NO on the other side," so the total value transacted is a dollar.

The Defiant tested this across 111,000 consecutive Kalshi prediction-market trades on Sept. 21 and found that yes and no prices summed to exactly $1.00 on 100% of them. The same held on Polymarket across 1,652 transactions.

What is confirmed

Confirmed facts from the source include: Kalshi denied wash trading and blamed a single market maker for the repeating trade size. The exchange pays market makers for resting liquidity, not for volume. Self-Clearing Members currently pay no fees on perpetuals, and the rebate program is in effect. Kalshi has contributed $40 million to the Guaranty Fund. The exchange's volume methodology counts notional value.

What is still unclear

Kalshi did not name the market maker, say how many liquidity providers hold agreements, or give the size of payments made under them. Individual market maker compensation is set by reverse auction and filed in a confidential appendix, with a disclosed ceiling of $50,000 per series per week. The post does not address whether Kalshi Trading LLC, an affiliated entity, participates in the perpetual markets. The CFTC's Conflicts and Affiliations proposal, which would restrict affiliate principal trading firms, is open for comment until Oct. 5.

Why it matters

The dispute matters because Kalshi is in talks to raise at a $40 billion valuation, and perpetual futures are its newest product. The response is the first account of who was on the other side of those trades, which the exchange's own API does not disclose. The outcome could affect trust in Kalshi's reported volume data.

Sources

• The Defiant

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