The U.S. compliant prediction market exchange Kalshi has recently faced concentrated questioning from the trader community. The issue arose due to a severe mismatch between its cryptocurrency perpetual contract transaction data and the scale of open interest. Many traders calculated that there is a discrepancy of up to approximately 14 times between the transaction volume disclosed by Kalshi and the actual capital invested.

Quantitative analyst Beni pointed out on September 21 that Kalshi's ETH perpetual contract had a 24-hour transaction volume of $538.6 million, while the corresponding open interest was only about $3.1 million, resulting in a turnover rate of 174 times, equivalent to completing a full turnover every 8 minutes and 18 seconds on average. Meanwhile, the largest single position on the platform was only $17,600, contrasting sharply with the massive transaction volume. Further analysis indicated that the market makers for this product previously received a rebate of 0.3 basis points, while the takers paid a fee of 0.3 basis points, making the bilateral cost nearly hedge to zero. This fee structure is also believed to potentially provide space for wash trading; Kalshi previously had a liquidity partnership with quantitative trading firm Jump Trading.

Kalshi's head of cryptocurrency business, icobeast.eth, later responded that the third-party data platform Artemis shows the transaction share of the prediction market business, not the perpetual contract data; Kalshi's cryptocurrency prediction market itself does not provide similar market-making rebates; the company's method of calculating contracts and notional amounts is consistent with Polymarket, ensuring comparability; as an exchange regulated by the U.S. Commodity Futures Trading Commission (CFTC), all incentive programs must be publicly filed, making it more transparent than offshore exchanges. He also refuted the claim that "self-settling members" (SCM) are equivalent to platform-designated market makers, stating that under the "fair access" regulatory requirements, any institution that meets CFTC qualifications can apply to become an SCM; he acknowledged that mainstream exchanges, including CME, Hyperliquid, and Binance, also have rebate and incentive mechanisms, emphasizing that Kalshi's perpetual contract business is still in its early stages.

The questioning quickly spread to the core prediction market business. Notable prediction market trader retardmode stated that about 61% of the transaction volume disclosed by Kalshi comes from "multi-event combination bets" (i.e., parlay bets that require guessing all events correctly to win), with nearly half of the combination bets wagering on more than 11 events, resulting in a very low probability of winning. He pointed out that Kalshi calculates transaction volume not based on the actual funds invested by users, but based on the notional value of each contract (i.e., the potential payout amount if all bets are correct) — for example, if a user spends $1 to buy a combination bet that could yield $14.1 if all bets are correct, the platform counts it as $14.1 in transaction volume. When recalculated based on actual funds, Kalshi's true transaction amount for the day was about $136 million, while the official disclosed figure was $1.91 billion, a discrepancy of about 14 times.

Top Polymarket trader caronpolymarket further calculated that the actual transaction amount of Kalshi's combination bets could account for only about 7.1% of the disclosed transaction amount; if this ratio is extrapolated monthly, there could be a huge gap where the "real transaction amount is about $4 billion, while the disclosed figure is as high as about $57 billion."

This controversy occurs against the backdrop of Kalshi's rapidly rising valuation — the company completed a $1 billion Series F financing in May this year, reaching a valuation of $22 billion, and by June was seeking to raise funds at a valuation of $40 billion, nearly doubling its valuation in about six weeks, which is seen as further widening the gap with competitor Polymarket. Combination betting products are also the core engine of Kalshi's recent business growth — previous data showed that the proportion of such products in the exchange's total transaction volume had rapidly increased from less than 3% earlier to about 22%, while retail investors' cumulative losses in such combination bets had reached about $117 million (15% of the total betting amount of about $800 million). Kalshi shares this "take" revenue with institutional market makers (including quantitative trading firm Sukvihana International Group), with estimates suggesting that Kalshi's fees from this could reach at least $35 million. In contrast, traditional sports betting companies usually have a higher "take" rate for combination bets (often exceeding 18%, sometimes over 20%), but retain all the profits without sharing with market makers. The authenticity of transaction volume data directly relates to investors' and regulators' judgments on the business scale and valuation rationality of this emerging exchange.

Kalshi positions itself as a financial exchange regulated by the CFTC and an "investment product," rather than a traditional gambling platform. This positioning is also the regulatory basis for its legal provision of "prediction contracts" for sports events, political events, etc.; however, the reality that combination betting products are highly similar to sports betting parlay plays is increasingly subjecting this regulatory positioning to external scrutiny.

Source: Public Information