Kalshi faces ‘fake crypto volume’ allegations as critic flags identical $5,500 trades

Regulated U.S. prediction market Kalshi is facing intense scrutiny over its newly launched crypto perpetual futures contracts, after a social media post flagged highly unusual market activity, alleging fake trading volumes.

The primary friction point is tied to how a healthy market is quantified, with allegations focusing on large trading volume relative to number of open positions. IcoBeast.eth, who oversees product development at Kalshi, argued on X that the accusations stem from a misunderstanding of its platform mechanics.

CoinDesk reached out to Kalshi for further comment but did not receive an immediate response.

The controversy began after a quantitative analyst and co-founder of Stealth Neolab, who goes by the name Beni on X, flagged a massive discrepancy in Kalshi’s ether

ETH$2,672.92

perpetual contract (ETH-PERP). He noted that it logged $539 million in 24-hour trading volume against an open interest of just $3.1 million.

In other words, the trading volume is 174 times larger than the open interest. This is typically seen as a textbook sign of wash or fake trading volume, whereby fake buying and selling lifts the aggregate trading activity tally while overall positioning, or money at stake, remains low.

Open interest refers to the total dollar value of active, outstanding contracts at any given moment. Trading volume, meanwhile, represents the total dollar value of contracts that actually changed hands over a specific time window.

To back his claims, Beni pointed to a highly unusual pattern of repetitive $5,500 trade sizes that single-handedly accounted for up to 58% of Kalshi’s entire ether perpetual volume across four separate days. He labeled the same as “undeniable proof” of volume manipulation.

He also noted a rebate schedule filed with the Commodity Futures Trading Commission (CFTC) that can leave certain Self-Clearing Members paying a net zero fee via a 0.3-basis-point maker rebate offset by a 0.3-basis-point taker fee. In essence, his argument is that when the cost of trading against yourself drops to zero, the incentive to artificially inflate volumes rises.

In trading, rebates are financial incentives, such as partial fee refunds or cash payments, given to high-volume market makers to encourage them to create more liquidity on a platform.

IcoBeast.eth initially brushed off the wash trading concerns on X, noting that the platform’s fee structure alone should deter manipulators. However, as the thread went viral, he followed up with a detailed breakdown to set the record straight.

First, he flagged a crucial mix-up in Beni’s original post, explaining that the Artemis chart cited in the complaint measured prediction-market share rather than perpetual contract volume.

He also demystified why Kalshi’s volume numbers look so high, explaining that they use the exact same reporting convention as Polymarket: volume reflects the maximum potential payout, not the upfront cash spent. Because each event contract pays out exactly $1 to the winner, the industry tracks volume by counting the total number of $1 outcomes on the line. For example, if a trader buys 100,000 contracts priced at 30 cents, they spend only $30,000 in cash, but the system records $100,000 in volume because that is the total maximum value of the contracts at maturity. This naturally inflates the headline volume figures, but it represents real user demand, not fake wash trading.

Turning his attention to the perpetual contracts, IcoBeast firmly rejected the idea that Kalshi handpicks a closed club of Self-Clearing Members. Under CFTC regulations, “fair access” is legally mandated, meaning any firm that clears the necessary capital and operational hurdles is legally entitled to join.

“Separately on perps you claimed that “Here SCM means market makers that are selected by Kalshi lmfao”. This isn’t true. Anyone can become a Self-Clearing Member of a CFTC regulated exchange as long as they meet the regulatory requirements. “Fair access” is a reg requirement for us,” IcoBeast.eth said.

Furthermore, he added that Kalshi does not offer rebates on its crypto event prediction contracts.

While he acknowledged that rebate programs are common practice across major venues like the CME Group, Hyperliquid, and Binance, he argued that Kalshi’s edge lies in its transparency. As a regulated Designated Contract Market (DCM), Kalshi is required by law to file all of its incentive schemes publicly with the CFTC, rather than negotiating them behind closed doors.

While he conceded that Kalshi’s U.S. perpetual product is still in its infancy, he emphasized that their regulatory obligations ensure transparency.

“I’m the first to admit that it’s early days for perps for us given we’re building a new product in untrodden territory (US perps). But the core difference between Kalshi and offshore perp exchanges is that while other exchanges run deals in the dark, we need to file our incentive programs publicly and so what you see is truly what you get,” he noted.