Industry observers are questioning whether soaring volumes on Kalshi and Polymarket reflect real demand or incentive-driven activity, even as both firms deny wash trading and chase multibillion-dollar valuations.
Prediction markets Kalshi and Polymarket have turned heavy trading numbers into a selling point for private raises and possible public listings. Yet some of those numbers now face direct scrutiny from analysts, professors, and market-structure veterans who say the patterns look off.
CNBC reported that activity on lower-odds contracts and tightly clustered trade sizes has raised fears that headline volume may overstate genuine demand. Both companies reject claims of wash trading or inorganic activity and point instead to arbitrage, sharp traders, and market design.
The timing matters. Polymarket has been raising capital at a valuation north of $20 billion. Kalshi has been reported in talks that would value it near $40 billion. Both have been described as exploring public markets as soon as next year. When volume becomes a valuation prop, the quality of that volume becomes a live issue for retail investors.
On Polymarket’s international exchange, which is not overseen by U.S. regulators, lower-odds contracts have repeatedly drawn more dollars than near-certain favorites. Barron’s flagged unusual activity on long-shot 2028 presidential markets back in April. The same skew showed up in sports and other multi-outcome markets.
World Cup contracts offered a clear example. Spain drew about $152 million in related trading. Egypt drew about $158 million even though its odds never crossed 0.5 percent. Morocco’s total ran slightly higher than Spain’s while never showing more than a 2 percent chance of winning.
The Ethiopia next-prime-minister market was starker. Abiy Ahmed sat near 98 percent odds and saw roughly $170,000 traded. Gedion Timothewos stayed below 3 percent for months and still attracted almost $56 million. Volume in that market jumped more than 6.7 times between June 21 and Sept. 25, according to Dune Analytics figures cited in the reporting, with a single-day peak above $15.3 million on July 30.
Joe Saluzzi, head of equity market structure research at Themis Trading, did not mince words on the long shots.
"Those are ridiculous long shots."
He added:
"It sounds like someone's trying to put some very, very low risk volume up there... Why would anybody be trading that?"
Kyle Gesuelli, Polymarket’s head of revenue and analytics, told reporters the activity comes from highly active “sharps” hunting mispricing, especially on the international venue where algorithms are thicker. He said the U.S. exchange skews more casual and retail. On the pricing effect, he argued the flow is constructive.
"It's actually healthy for markets because it brings pricing imbalances back into balance."
A Columbia University study first released in November 2025 offered a harder number. Patterns its authors treated as indicative of wash trading made up 60 percent of Polymarket international’s weekly volume in December 2024, fell to 20 percent by October 2025, and, per lead author Allen Sirolly, reached a negligible level by April 2026. Sirolly still called the lingering popularity of low-odds contracts concerning. Polymarket has denied wash trading and declined to comment on airdrop speculation that some observers float as a motive for empty volume.
Kalshi’s trouble center sits in its perpetual futures, which debuted in June. On Sept. 20, a user on X named Benoît Dubosson flagged odd behavior in the ether contract and theorized wash trading. CNBC’s own look at that day’s tape found nearly half the dollar volume in trades sized between $5,495 and $5,505.
Open-interest comparisons widened the gap with peers. As of one Wednesday morning cited in the reporting, Kalshi’s bitcoin perpetual showed 24-hour volume about 42 times open interest. Its ether perpetual ran about 66 times open interest. Polymarket’s ether perpetual sat near three-quarters of open interest. Hyperliquid, a major offshore perpetual venue not available in the United States, ran about one-third. Hyperliquid allows up to 25 times leverage on ether; Kalshi caps near 4.9 times.
Traditional regulated venues usually look nothing like Kalshi’s ratio. CME bitcoin futures typically see volume below open interest. Kalshi spokesperson Jack Such said the firm has “zero concerns” about the daily-volume-to-sitting-liquidity ratio and called offshore comparisons flawed.
"That is an apples and oranges comparison: they are using a different system and playing by different rules."
In a blog post the company published the prior Tuesday, Kalshi said hundreds of users were involved in the flagged trades, said it monitors for self-trades and collusion, and described the flow as speculators working arbitrage. The firm is also waiving trading fees through the end of 2026 to pull traders into the new futures product, and it runs market-maker incentives that several academics say distort the tape.
Andre Guettler, a finance professor at Ulm University in Germany, examined the perpetual patterns in a working paper and told interviewers the volume-to-open-interest picture “doesn't look very organic.” His paper warned about what manufactured flow would mean for any listing story.
"To the extent that a material share of reported perpetual volume is manufactured... headline volume and its trajectory may overstate the underlying trading demand on which such a valuation would rest."
He added:
"This distinction matters most for retail investors, who are the natural buyers of a prediction-market exchange at a public listing."
Rajiv Sethi, an economics professor at Barnard College, stopped short of a wash-trading charge but rejected the clean bill of health.
"What Kalshi is doing in a nutshell is they're funneling money to aggressive liquidity takers through the market makers."
Sethi continued:
"I'm not attributing it to wash trading."
And:
"But I disagree... that this is perfectly fine."
Craig Pirrong, a finance professor at the University of Houston’s C.T. Bauer College of Business, described the same loop in plainer terms.
"It's sort of creating the appearance of liquidity, but it seems like a self-licking ice cream cone."
He added:
"It seems to be liquidity that's provided to harvest the incentives."
The Wall Street Journal reported that the Commodity Futures Trading Commission has been examining trades in Kalshi’s ether perpetual. CNBC could not independently verify the examination. A CFTC spokesperson said the agency does not confirm or deny investigative matters.
CFTC Chairman Michael Selig, appearing on CNBC’s “Squawk on the Street,” left little doubt about the standard he wants enforced.
"We have a zero tolerance policy when it comes to any sort of manipulative trading, including wash trading, insider trading, or fraud in our markets."
Selig also said:
"When you have new types of markets evolving, you're going to see fraud with that."
Tamika Bent, a partner at K&L Gates, described the baseline duty of a designated contract market: it “has a duty to protect market integrity by monitoring market conditions, price movements, and volumes in real time for abnormalities.” She added that DCMs would be expected to surveil unusual volume and look into signs of disruption.
Federal oversight is only half the pressure. Prediction platforms are already fighting state attorneys general and courts that treat sports contracts as gambling. Connecticut’s lawsuit against Kalshi frames those contracts as unlicensed gambling, and the volume debate lands on top of that legal risk.
Separate actions show how wide the state front has become. New York’s sweeping case seeks enormous penalties tied to the same core dispute over whether these markets are finance or gambling.
Court rulings have cut both directions and raised the stakes for any firm selling growth on the back of raw volume. A Sixth Circuit decision cleared Ohio and Tennessee to police Kalshi under state gambling laws, while other circuits harden the opposite line.
West Coast litigation points the same way. A Washington state judge blocked certain Kalshi contracts under gambling statutes, and the Ninth Circuit’s Nevada ruling sets up a deeper conflict that could reach the Supreme Court.
Several outside voices tie the odd tape to design choices rather than classic matched wash trades. Kalshi’s fee waiver through 2026 and its market-maker rebates can pay aggressive takers to churn. U.S. rules, as described by Kalshi’s own spokesman, do not let the firm pay users simply to park capital, which pushes incentive design into trading credits and rebates instead.
On the crypto-native side, Jay Maliava, co-founder and CEO of prediction-market terminal Kairos, noted that token airdrops are a common reward tool and that platforms sometimes review open interest or individual volumes for eligibility. Polymarket declined to comment on whether an airdrop is coming. Its international platform runs on the Polygon blockchain, where that style of reward has been common.
CNBC’s September review of 2028 Republican nominee contracts on Polymarket’s U.S. exchange did not find the same low-odds volume skew visible on the international book. Even there, an Elon Musk nominee contract drew more volume than a JD Vance contract, despite the article’s statement that Musk is not eligible for the presidency. Small samples do not prove manipulation. They do show how quickly attention, memes, and incentives can swamp boring fundamentals.
Kalshi’s commercial ties add another layer readers deserve to see. CNBC disclosed a commercial relationship that includes customer-acquisition work and a minority investment. That does not settle the volume debate either way. It does mean coverage and capital are already intertwined as these firms prepare larger raises.
Guettler’s warning remains the cleanest statement of the equity problem. If a material share of perpetual volume is manufactured, the trajectory that bankers will put in a pitch deck overstates the demand a public shareholder is actually buying. Sethi and Pirrong, from different angles, say the incentive machine can manufacture the appearance of depth without proving outside customers need the product.
Companies answer that sharps correct prices, hundreds of accounts touched the flagged Kalshi prints, and surveillance systems watch for collusion. Those are real operational claims. They are also the minimum one should expect from a CFTC-regulated exchange, not a full answer to why ether volume can print at 66 times open interest while established venues run at a fraction of that level.
Prediction markets can hedge risk and aggregate information when the tape is honest. When fee waivers, maker rebates, and airdrop hopes dominate, the same venues risk teaching retail that activity equals value. Regulators say they have zero tolerance for wash trades and fraud. State AGs are already treating sports contracts as gambling. In that climate, volume that cannot explain itself is not a branding asset. It is a balance-sheet risk.
Investors should demand proof that the surge is real demand, not another incentive loop dressed up as a market.