Kalshi to end liquidity incentive program amid wash trading allegations

Kalshi is terminating its volume incentive program, which was designed to reward traders for boosting liquidity.

In a Monday filing with the Commodity Futures Trading Commission, Kalshi wrote that it intends to end the "Volume Incentive Program" no earlier than Oct. 13.

The program, which launched in March 2023, paid traders from reward pools based on their share of eligible volume, with the aim of boosting liquidity, and "thereby enhance pricing efficiency," the filing said. 

The rewards were tied to trades on the central limit order book, typically at prices between $0.03 and $0.97 for event contracts, according to the filing.

The decision to end the incentive program comes amid reported regulatory scrutiny over trading activity. An X account named Beni alleged that Kalshi inflated its perpetual futures volume, pointing to roughly $539 million in 24-hour trading volume against just $3.1 million in open interest for Kalshi's ETH perps pair.

The Wall Street Journal reported last week that the CFTC was examining trades on the platform following allegations that repeated trades of around $5,500 inflated ether perpetual futures volume. Those trades accounted for more than $5 billion in ETH perps volume over the past month.

Kalshi, however, has said it was not under investigation over the matter. In a blog post published last week, Kalshi said wash trading does not occur on the platform, and attributed the repeated prints to market makers posting fixed quotes that faster traders hit.

Meanwhile, Kalshi's monthly volume reached $52.98 billion in September as of Sept. 29, surpassing the $38.67 billion recorded in August and marking an all-time high, though September data remains incomplete, according to The Block's data dashboard.

Investor interest

Kalshi has also attracted growing investor interest. Cathie Wood's Ark Invest announced Tuesday that it now holds direct exposure to Kalshi through its exchange-traded funds ARKK, ARKW, and ARKF.

Ark said in an X post that it sizes the medium-term prediction market opportunity at $1 trillion to $5 trillion in annual volume.

"While Kalshi is still private, we want our investors in early," said Nick Grous, Ark's director of research for consumer internet and fintech.

"We are very happy to have introduced another private company, Kalshi, to our ETF strategies," Wood wrote on X. "Kalshi's management team is phenomenal, as it is skating to where the prediction markets puck will be."

The move comes as Kalshi reportedly seeks fresh capital. Reuters reported Tuesday that the prediction markets platform is in advanced talks to raise about $1 billion at a roughly $40 billion valuation.