Wash Trading Fears Cloud Kalshi, Polymarket Volume Growth — SkimNews
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- Kalshi's ether perpetual futures saw trades between $5,495 and $5,505 make up nearly half of dollar volume on Sept. 20, with 24-hour trading volume abnormally high relative to actual resting liquidity, per a CNBC analysis.
- Polymarket's international exchange shows a consistent pattern where low-odds contracts attract more volume than high-odds ones — including a Ethiopia PM contract where 98%-odds winner Abiy Ahmed had just $170K traded versus $56M on longshot Gedion Timothewos, whose odds never crossed 3%.
- A Columbia University study found patterns indicative of wash trading accounted for 60% of Polymarket international's weekly volume in December 2024, dropping to 20% by October 2025 and to negligible levels by April 2026, according to lead author Allen Sirolly.
- CFTC Chairman Michael Selig said the agency has a "zero tolerance policy" on manipulative trading, while the Wall Street Journal reported the CFTC is examining Kalshi's ether perpetual future trades (CNBC could not independently verify).
- Polymarket head of revenue Kyle Gesuelli attributes low-odds activity to "sharps" exploiting mispricings rather than wash trading, while Kalshi spokesperson Jack Such said the company has "zero concerns" about the volume-to-liquidity ratio on its platform.
- Kalshi's fee structure — waived trading fees through end of 2026 plus fee rebates — may be enabling traders to consistently profit from arbitrage that inflates reported volumes, according to Barnard College economics professor Rajiv Sethi.
- Polymarket is raising at a $20B+ private valuation and Kalshi is reportedly in talks at a $40B valuation, with both companies pointing to surging trading volumes to justify their worth as they explore public market moves as soon as next year.
Why it matters: Retail investors evaluating potential IPOs from Kalshi (reportedly in talks at $40B) and Polymarket (raising at $20B+) face a concrete risk: if reported volumes are manufactured, headline growth may overstate underlying demand. Andre Guettler of Ulm University wrote that the distinction "matters most for retail investors, who are the natural buyers of a prediction-market exchange at a public listing." The CFTC is already examining Kalshi's ether trades.
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