As prediction markets witness unprecedented activity, new concerns have arisen regarding the methods used to generate and report trading volumes.
Kalshi, a platform for crypto-perpetual trading, has come under increased scrutiny following a quantitative analyst's revelation of a staggering $539 million in Ethereum trading volume over 24 hours, juxtaposed with a mere $3.1 million in open interest. This discrepancy raised eyebrows, particularly as it suggested a trading volume approximately 174 times greater than the open interest.
Beni, a co-founder of Stealth Neolab, brought attention to this issue on social media, asserting that Kalshi's reported crypto volume is artificially inflated. He noted a consistent trade size of around $5,500, which he claimed constituted 48% to 58% of the Ethereum perpetual volume across several days. Beni stated, "Kalshi fakes their crypto volume and I can prove it."
In response to these allegations, Kalshi's crypto lead, IcoBeast, defended the platform, clarifying that Beni's analysis mistakenly conflated prediction market activity with perpetual futures volume. He also denied claims that Kalshi selectively chooses firms for its Self-Clearing Members program.
Additionally, a Kalshi incentive program, designed to offer reduced fees and rebates to qualifying participants, was highlighted by Beni. He argued that such incentives could facilitate the creation of artificial trading activity. However, Kalshi's program explicitly excludes transactions suspected of wash trading or other manipulative practices from receiving rebates.
In a separate investigation, TickerTracker identified unusual trading behaviors across 221 million trades in Kalshi's prediction markets. Notably, an automated system was found to be repeatedly buying and selling in a market concerning the 2028 Democratic presidential nominee, which accounted for a significant portion of the trading volume.
Despite these findings, TickerTracker emphasized that public data alone is insufficient to confirm wash trading, as it does not disclose the identities of the parties involved in the transactions or the motivations behind them.