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.
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