Some industry observers have raised doubts about the trading volumes of certain products on the forecasting market platforms Kalshi and Polymarket, fearing that these figures may be exaggerated.
On Polymarket, observers have pointed out a peculiar phenomenon in the company's international exchange, which is not regulated by the United States: in markets that contain multiple contracts, contracts with lower occurrence probabilities tend to be more active than those with higher probabilities. This phenomenon is observed in markets related to elections, sports, and central bank decisions.
At the same time, on September 20th, a user on X pointed out that there were abnormal patterns in the Ethereum smart contract market for Kalshi. Transactions amounting to approximately $5,500 accounted for the majority of these contract transactions, and the 24-hour trading volume was abnormally high compared to the actual order liquidity. Analysis of CNBC revealed that on September 20th, nearly half of the trading volume of Kalshi's Ethereum smart contracts came from single transactions ranging in size from $5,495 to $5,505.
Both situations have raised concerns among some observers that these companies may be manipulating inflated trading volumes. In the worst-case scenario, there could be wash trading, where traders collude to buy and sell a certain asset in order to create a false appearance of economic activity.
Both Kalshi and Polymarket deny that any of their products involve wash trading, and also deny that these patterns represent unnatural transactions.
K& L Gates partner Tamika Bent stated that the exchange type used in the designated contract market – the prediction market – “has the responsibility to maintain market integrity by monitoring market conditions, price changes, and anomalies in trading volume in real-time.” She said, “You would expect DCM to monitor abnormal trading volumes and investigate any signs of market disturbances.”
Polymarket is currently raising funds in the private market, with a valuation of over $20 billion; after launching on a US exchange in May, the company saw an increase in trading activity. Meanwhile, it is reported that Kalshi, after introducing perpetual contract products in June, is in talks to raise funds, with a valuation that could reach $40 billion. Both companies use the soaring trading volume as an indicator of growing popularity among exchanges and rely on this to support their valuations.
However, as both companies are reportedly likely to seek entry into the public market as early as next year, the accuracy of these trading volume figures is coming under scrutiny.
A finance professor at the University of Ulm in Germany, Andre Guettler, wrote in a working paper on the trading volume patterns of Kalshi perpetual contracts: "If a considerable portion of the reported trading volume of perpetual contracts is artificially created... then the headline trading volume and its trends may overestimate the underlying trading demand that supports such valuations. This distinction is particularly important for retail investors, as they are the natural buyers when predicting market movements at the time of listing."
Polymarket, the supervisor in charge of revenue and data analysis, told CNBC that the popularity of low-probability contracts is not due to wash trading or unnatural activities, but rather because highly active traders, namely the so-called “sharps”, have identified pricing discrepancies in various types of contracts.
He said, "This is actually beneficial to the market, as it brings pricing imbalances back to equilibrium."
Kalshi denied last week that there were any wash trading activities on the platform and stated that they had traced hundreds of users involved in the transactions initially mentioned on social media. However, experts interviewed by CNBC pointed out that the ratio between the daily trading volume of these contracts and the actual liquidity of the orders is concerning, reflecting an inefficient market structure that can lead to unnatural activities.
Kalshi Spokesperson Jack Such stated that the company "has no concerns at all" about this ratio.
The Wall Street Journal reported that the U.S. Commodity Futures Trading Commission is reviewing transactions on the Kalshi Ethereum perpetual contract. CNBC It is not possible to independently verify this report. CFTC A spokesperson stated that the agency will not confirm or deny matters related to the investigation.
On last Wednesday, in the program “Squawk on the Street”, CFTC (Chairman) Michael Selig stated: “We have a zero-tolerance policy towards any form of manipulative trading, including wash trading, insider trading, or fraud in our market. Whenever new types of markets emerge, you will see fraud accompanying them.”
Low-probability contracts are popular.
A report in April by Barron stated that there was an abnormally low level of market trading activity for contracts related to the winner of the 2028 presidential election on Polymarket international exchanges.
A contract that inquires whether “JD Vance” will become a Republican presidential candidate in 2028 has even lower trading volume than a contract regarding “Elon Musk”, despite the fact that “Musk” does not qualify to run for president. Similar abnormal trading volume patterns have also been observed in markets related to potential Democratic candidates for 2028.
The Kalshi market did not experience the same situation; on its platform, the trading volume of candidates with lower probabilities to win in the 2028 presidential election was lower than that of candidates with higher probabilities. Additionally, a trade analysis for the entire month of September in CNBC showed that on the US exchanges regulated by CFTC, which are under the supervision of Polymarket, no such pattern was observed in contracts related to the 2028 presidential candidates.
Abnormal transactions also occurred in sports-related contracts on international exchanges. For the 2026 FIFA World Cup, Spain, a favorite to win, had a trading volume of 152 million US dollars on contracts related to their chances of winning, which is lower than the 158 million US dollars for Egypt; Egypt's chances of winning never exceeded 0.5%. This figure is also slightly lower than that of Morocco, whose chances of winning never exceeded 2%.
Perhaps the most notable is a contract that asks "who will be Ethiopia's next prime minister?" The current prime minister, Abiy Ahmed, who has a 98% probability of winning this election according to the contract, had related transaction amounts of about $170,000. Meanwhile, Gedion Timothewos has had a probability of less than 3% for several months, yet the related transaction amounts are close to $56 million. Despite the election having concluded in June, this contract is still being traded.
Themis Trading, the head of stock market structure research, said: "Those are all absurd and obscure long-term bets. It sounds like someone is trying to pile up some transactions with extremely low volumes... Why would anyone trade this?"
Analysis of data from CNBC versus Dune Analytics shows that from June 21st – when reports indicated that Ahmed had won the election – to September 25th, the trading volume of Ethiopian election-related contracts increased by more than 6.7 times. The highest single-day trading volume in this market occurred on July 30th, exceeding 15.3 million US dollars, and that was over a month after the confirmation of the victory. A spokesperson for Polymarket told CNBC that the contract will be settled when the elected government officially takes office this summer, with an expected date of October 5th.
Gesuelli indicates that such low-probability contract activities are more common on international exchanges of the company, as there are more sharps there. They often use complex software and algorithms to trade and profit from subtle pricing discrepancies. He said that American exchanges are dominated by ordinary retail traders.
Concerns regarding wash trading of Polymarket are not a new issue. A study first published in November 2025 by researchers from Columbia University found that transaction patterns identified as wash trading accounted for 60% of the weekly trading volume on Polymarket international exchanges in December 2024, but this figure had dropped to 20% by October 2025.
The first author of the study, Allen Sirolly, stated that this indicator had dropped to an insignificant level by April 2026. A spokesperson for Polymarket mentioned that expanded monitoring and the introduction of fees on exchanges have reduced the likelihood of market manipulation. However, Sirolly believes that the continued popularity of low-probability contracts is still concerning.
Many market observers predict that these unusual discrepancies on the Polymarket international exchange are attributed to the platform's past hints of possible crypto token airdrops.
The co-founder and CEO of the predictive market trading terminal Kairos, Jay Maliava, explained that token airdrops are a common method for crypto companies to reward early users, who help the platform grow in scale and become more influential. The international platform of Polymarket operates on the Polygon blockchain.
But if an airdrop does actually happen, it's not clear who will receive the rewards. Maliava indicates that the criteria may vary, but the platform might consider users' open positions or their individual trading volume to determine eligibility.
Polymarket refuses to comment on speculation about airdrops.
The “perps” of Kalshi has sparked controversy
Beno and Dubosson first pointed out the abnormal trading activities on the Kalshi Ethereum contract on September 20th. They posted continuously on X, speculating that these transactions constituted wash trading.
Some people have also raised doubts about the authenticity of the trading volume of Kalshi. Critics argue that incentives provided by market makers, which are common practices in financial exchanges to maintain order book liquidity, as well as the arrangement by Kalshi to waive transaction fees until the end of 2026 to attract traders to participate in the company's new futures products, may have encouraged such behavior.
Kalshi refuted these claims in a blog post last Tuesday. The company stated that these transactions involved hundreds of users and claimed to have established mechanisms to monitor for fraudulent or collusive behavior. The company explained that it was more likely that speculators were engaged in arbitrage trading: the spot price of a certain cryptocurrency changed on another exchange, while the initial quotes offered by market makers were slightly lagging behind. Traders could then take advantage of these slightly outdated quotes and quickly profit from them.
The experts interviewed by CNBC generally agree that these transactions are most likely not wash sales. However, Barnard College, a professor of economics, and Rajiv Sethi believe that the issue still exists.
He said that the fee structure of Kalshi enables traders to utilize the perpetual contract market and continuously profit from arbitrage. And the reason these profits are possible is that Kalshi has implemented a trading fee rebate to attract early-stage perpetual contract speculators.
Sethi indicates that: Kalshi is ultimately about channeling money to radical liquidity recipients through market makers.
Kalshi The defense of these incentive measures – whether for market makers or for traders on the other side of these orders – is that they are crucial for providing early liquidity to a new market.
However, experts say that the effectiveness of these incentives is being weakened by the high turnover of liquidity. As of Wednesday morning, the trading volume of Bitcoin and Ethereum perpetual contracts on Kalshi was approximately 42 times and 66 times that of the platform's open interest contracts, respectively. This is distinctly different from other international perpetual contract products.
German finance professor Guettler said in an interview, "This doesn't seem very natural."
On Polymarket, the 24-hour trading volume of its Ethereum perpetual contracts is about three-quarters of that of the open contracts; whereas on the industry leader Hyperliquid, as of Wednesday morning, the 24-hour trading volume was only one-third of that of the open contracts. Neither of these two perpetual contract exchanges is open to US users.
The professor of finance at the Business School of the University of Houston, C.T, Bauer, said when discussing Kalshi: "It's a bit like creating an illusion of liquidity, but it looks more like an ice cream machine that licks itself. It seems to be providing liquidity just to gain incentives."
According to spokesperson Kalshi and Such, the difference in 24-hour trading volumes is partly due to the fact that the company offers lower leverage compared to offshore exchanges. Hyperliquid's Ethereum perpetual contracts offer a maximum leverage of 25 times, whereas Kalshi only allows traders to use a maximum leverage of 4.9 times.
He added that infrastructure and US regulatory requirements also contribute to these differences. Such indicates that Kalshi does not allow market makers to re-quote after price changes, and US regulations also do not permit companies to incentivize users to keep their funds on the platform in order to attract more capital.
Such also indicates that it is not fair to compare exchanges regulated by CFTC with offshore exchanges. “It’s like comparing apples and oranges: they use different systems and follow different rules.” However, on the regulated US exchange CME, the tradable volume of traditional Bitcoin futures contracts is usually lower than that of open interest contracts.
Nevertheless, Sethi believes that the discrepancy between trading volume and open interest should prompt Kalshi to reconsider some of the incentives for its perpetual contracts.
He said, "I don't attribute it to wash trading. But I disagree... There's absolutely no problem with that."
Disclosure:CNBC has a business relationship with Kalshi, which includes customer acquisition and a small amount of equity investment.
