Gambling Insider's investigation into trading activity on Kalshi's ether perpetual futures market has cast doubt on the exchange's explanation for a surge of highly concentrated, fixed-size transactions. The analysis found that these trades, which accounted for more than half of the contract's notional value over two months, did not consistently deliver the pricing edge expected under Kalshi's stated rationale.
Trading Patterns Raise Questions
Between August and September, trades clustered around six specific dollar amounts made up $9.81 billion of Kalshi's $17.56 billion ether perp volume. Kalshi attributed this concentration to its market-maker incentive program, suggesting that market makers placed resting orders of fixed sizes, which were then repeatedly executed by faster traders exploiting stale quotes. However, Gambling Insider's analysis of 5.35 million trades indicated that these fixed-size traders only beat the spot-implied ether price on 33% of transactions—close to the 35% benchmark for random trades. Even when allowing for brief timing differences, their advantage remained marginal.
Comparison to Other Exchanges
To determine whether such concentration was typical, Gambling Insider enlisted crypto data firm Kaiko to compare with Binance and Hyperliquid. The analysis revealed that Kalshi's most common trade size accounted for 55.8% of notional value, dwarfing the 1.61% to 3.79% seen on the other exchanges. Even Kalshi's least concentrated day exceeded the highest daily concentration on its peers. While this level of concentration is unusual, experts noted that it could result from the smaller, less mature nature of Kalshi's market, rather than manipulation.
Expert Opinions and Unresolved Explanations
Economist Rajiv Sethi, who had previously supported the 'tolerated sniping' theory—where market makers accept small losses in exchange for incentive payments—said the new data led him to reconsider this explanation. The investigation did not find evidence of wash trading, and none of the experts consulted concluded that manipulation had occurred. Kalshi declined to comment on the findings.
Implications for Industry Stakeholders
The findings are significant for operators, regulators, and affiliates monitoring market integrity and trading incentives. The exceptional concentration of trade sizes on Kalshi, alongside the lack of clear advantage for fixed-size traders, may prompt further scrutiny from regulators and could influence how incentive programs are structured in emerging markets. For affiliates and other market participants, the results highlight the importance of understanding market dynamics and the potential impact of incentive-driven trading patterns on reported volumes and perceived liquidity.
Key takeaways
- Kalshi's explanation for concentrated ether perp trades is challenged by new analysis.
- Fixed-size traders did not consistently outperform the market as expected.
- Trade-size concentration on Kalshi far exceeded that on major rival exchanges.
- No evidence of wash trading was found, but questions remain about market structure and incentives.