Kalshi is facing scrutiny over trading activity on its cryptocurrency derivatives platform as prediction markets recorded $7.64 billion in notional volume during the September 19–20 weekend.
Questions about the exchange’s reported trading figures emerged after a quantitative analyst identified unusual patterns in Ethereum perpetual futures transactions. Kalshi has disputed the allegations, while separate research has raised concerns about how trading activity is measured across prediction markets.
The controversy comes as US authorities increase their attention to event-based contracts, with Missouri pursuing enforcement against six operators and federal lawmakers preparing further discussions on the sector.
Kalshi Disputes Allegations Over Cryptocurrency Trading
Beni, co-founder of quantitative research firm Stealth Neolab, questioned Kalshi’s recently introduced cryptocurrency perpetual futures after identifying approximately $539 million in Ethereum trading volume over 24 hours against open interest of just $3.1 million.
The figures represented a volume-to-open-interest ratio of approximately 174 to one. Open interest measures the value of outstanding positions, rather than the total value of transactions executed during a trading period.
The analyst also identified recurring transactions of approximately $5,500, which he claimed represented between 48% and 58% of Ethereum perpetual futures volume across four separate days.
Beni suggested that the exchange’s reported activity could include artificially generated transactions. He also questioned a Kalshi incentive programme filed with the Commodity Futures Trading Commission (CFTC), which offers reduced fees and rebates to eligible market participants.
However, the programme explicitly excludes transactions involving suspected self-matching, wash trading and other abusive practices from rebate eligibility.
Kalshi’s cryptocurrency lead, known as IcoBeast, rejected the allegations and challenged the analyst’s interpretation of the data. He explained that an Artemis chart cited in the discussion measured prediction-market activity rather than perpetual futures trading.
He also disputed the suggestion that Kalshi selectively chooses which companies can become Self-Clearing Members.
The unusual trading patterns and differences between volume and open interest do not independently establish market manipulation.
Separately, analytics platform TickerTracker examined 221 million transactions across 4,562 Kalshi prediction markets and identified another unusual pattern.
In a contract concerning whether Zohran Mamdani would become the Democratic presidential nominee in 2028, an automated trading system repeatedly purchased contracts at 0.2 cents and sold them at 0.1 cents.
The activity represented 67% of the market’s September trading volume through September 20.
TickerTracker cautioned that publicly available transaction records cannot establish whether wash trading occurred because they do not identify the ultimate owners of both sides of each transaction or the reasons behind the trades.
Prediction Markets Report Record Weekend Activity
Despite the questions surrounding trading activity, prediction-market exchanges recorded a new weekend high on September 19–20.
According to TickerTracker, eight monitored exchanges generated a combined $7.64 billion in notional trading volume, an increase of 20% from the previous weekend’s $6.34 billion.
Kalshi accounted for $5.83 billion, while Polymarket’s US platform recorded slightly more than $1.03 billion.
Parlay contracts generated $4.49 billion, representing 58.8% of total activity, while football-related markets accounted for $1.45 billion.
These figures measure notional contract volume rather than the actual amount of money committed by traders. Prediction-market contracts are generally counted at their $1 face value, regardless of their purchase price.
Consequently, contracts purchased for only a few cents can contribute substantially more to reported notional volume than the amount of capital used to acquire them.
A separate Gambling Insider analysis of Kalshi’s August trading records found that sports contracts and parlays represented 74.7% of exchange volume when measured at face value, compared with 58.5% when measured by money actually staked.
Parlays alone accounted for 44.6% of face-value volume but only 9.6% of the capital committed by traders.
Missouri Targets Six Prediction-Market Operators
Missouri Attorney General Catherine Hanaway has issued cease-and-desist letters to Kalshi, Polymarket, Crypto.com, Novig, Underdog and Robinhood.
The attorney general’s office maintains that the companies’ sports-related event contracts constitute unlicensed wagering under Missouri law and that operators must obtain authorisation from the Missouri Gaming Commission.
The action follows earlier indications that Missouri was preparing enforcement measures against prediction-market operators. Hanaway has also indicated that her office remains open to a settlement.
The dispute adds Missouri to the expanding legal conflict over the regulatory treatment of prediction markets, with related proceedings affecting more than two dozen US states.
Meanwhile, Underdog has introduced a public data platform providing aggregated trading information from prediction markets accessible through its services.
The platform includes transactions routed through multiple designated contract markets, including Underdog’s UDX exchange, but excludes fantasy sports activity.
Users can examine notional volume, review transaction histories, download trading data and access daily UDX market reports in the CFTC’s reporting format.
Underdog recorded $182 million in weekend volume, placing it fourth among the tracked platforms behind Kalshi, Polymarket and Crypto.com, and slightly ahead of Novig.
Federal Lawmakers and European Regulators Examine the Sector
Republican members of the US Senate Banking Committee are preparing a roundtable focused on securities-based prediction markets, with Kalshi representatives expected to participate.
A complete participant list and formal public agenda have not been released.
The discussion follows a Republican-only House Financial Services Committee roundtable in June attended by representatives of Kalshi, Polymarket, Robinhood and the American Gaming Association.
Oversight of commodity event contracts primarily falls under the Senate Agriculture Committee, which has jurisdiction over the CFTC.
In Europe, Polymarket is seeking financial-market rather than gambling regulation for its prediction contracts.
The company has engaged with the European Commission, the European Securities and Markets Authority (ESMA) and the UK’s Financial Conduct Authority (FCA), arguing that its products should be treated as derivatives under financial services rules.
However, gambling regulators in the UK, France, Germany and Italy have maintained that prediction markets require appropriate local gambling licences.
ESMA has also raised concerns about insider trading and market integrity within the sector.
The FCA has distinguished between prediction contracts linked to financial or certain climate-related events, which can fall within its remit, and political or sports markets, which may fall under the Gambling Commission.
The contrasting regulatory approaches illustrate the continuing uncertainty surrounding the classification and oversight of prediction-market products.