Kalshi is winding down its liquidity incentive program after facing allegations that the rewards encouraged wash trading. The prediction market's decision comes as its monthly volume hit an all-time high of $52.98 billion in September, according to data through Sept. 29, which is still incomplete.
Why the incentive program is going away
The program, which paid traders for providing liquidity, has been criticized for creating incentives that can be gamed. Wash trading—where a trader buys and sells the same asset to inflate volume—is a known risk in such setups. Kalshi hasn't publicly detailed the specific findings, but the move signals it's responding to the concerns.
The company didn't say whether regulators are investigating or if any users have been penalized. It also hasn't announced a replacement program or a timeline for the wind-down. A Kalshi spokesperson didn't immediately respond to a request for comment.
The volume numbers behind the decision
September's $52.98 billion in volume is the highest the platform has recorded, based on data through Sept. 29. But that figure is preliminary and could shift as more trades are reported. The all-time high is notable because it came during a month when the incentive program was still active, raising questions about how much of that activity was genuine.
Kalshi is a regulated prediction market where users trade contracts on real-world events, from elections to economic indicators. Unlike sportsbooks, it operates under the oversight of the Commodity Futures Trading Commission. That regulatory status makes wash trading allegations particularly sensitive—any hint of artificial volume could draw scrutiny from the CFTC.
What wash trading means for prediction markets
Wash trading is illegal in traditional financial markets because it distorts prices and creates a false sense of activity. In prediction markets, where liquidity is often thinner than in stock or crypto markets, incentive programs are a common way to attract traders. But they can also be exploited: a user might trade with themselves to earn rewards without taking on real risk.
Kalshi's decision to end the program suggests it's trying to get ahead of the problem. The company hasn't said whether it will refund or claw back any rewards, or if it will change how it calculates volume going forward. For now, traders who relied on those incentives will need to find another reason to provide liquidity.
Kalshi hasn't set a date for when the program will officially end. It also hasn't said whether it will introduce new incentives that are harder to manipulate—like requiring trades to be held for a minimum period or tying rewards to actual market impact.
The September volume record will stand as a milestone, but the incomplete data means the final number could be higher or lower. The bigger question is whether Kalshi's move will satisfy regulators and restore confidence among traders who worry that the platform's numbers have been inflated. The CFTC doesn't comment on specific investigations, and Kalshi hasn't said if it's in talks with the agency.
For now, the prediction market is left with a record month and a program it's phasing out. What replaces it—and whether the volume holds up without the incentives—won't be clear until October's numbers come in.
