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- Prediction market platforms Kalshi and Polymarket are facing intensifying regulatory scrutiny over unusual trading patterns, with the CFTC reportedly investigating heavy trading clusters in Kalshi‘s ether perpetual contracts following public wash-trading allegations.
- Despite both platforms fiercely denying inorganic trading—with Polymarket defending massive, multi-million-dollar long-shot action in its international World Cup and political markets as healthy algorithmic arbitrage—the growing federal interest arrives just as both companies are reportedly pursuing massive valuations and potential public listings as early as next year.
Kalshi and Polymarket are facing fresh scrutiny over unusual trading patterns on their prediction market platforms, with both companies denying wash trading as reported regulator interest grows.
The issue matters because both companies are expanding rapidly and are reportedly discussing lofty valuations and potential public listings. Any sustained questions about market integrity could draw more attention from the Commodity Futures Trading Commission and from investors watching the sector.
Kalshi ether market activity draws the sharpest regulatory focus
According to the source report, a user on X flagged unusual activity in Kalshi’s ether perpetuals on Sept. 20, with many trades clustering around $5,500. CNBC said its review found that close to 50% of one day’s notional trading came from orders in the $5,495-$5,505 range.
Kalshi denied any improper activity. The company said it identified hundreds of distinct users in the Sept. 20 trading. Spokesperson Jack Such also said the exchange had “zero concerns” about the contract’s volume-to-liquidity ratio.
The report also cited The Wall Street Journal as saying the CFTC is looking into transactions in Kalshi’s ether perpetual. CFTC Chairman Michael Selig said the agency has a “zero tolerance policy” for manipulative trading, including wash trading, insider trading, or fraud. He also said, “When you have new types of markets evolving, you’re going to see fraud with that.”
Polymarket disputes claims that long-shot trading is inorganic
On Polymarket’s international platform, observers highlighted trading patterns in which low-probability outcomes sometimes attracted more action than favorites. The report pointed to examples in 2028 U.S. presidential markets, the 2026 FIFA World Cup market, and a market on Ethiopia’s next prime minister.
In the World Cup market, Egypt drew $158 million in trading and Morocco reached a 2% probability at one point, while favorite Spain had $152 million in trading. In the Ethiopia market, Abiy Ahmed was priced at 98% but had about $170,000 in trading, while Gedion Timothewos drew almost $56 million despite odds of 3% or lower for months.
Polymarket denied wash trading. Kyle Gesuelli, the company’s head of revenue and analytics, said active traders using advanced tools and algorithms were exploiting mispricings in long-shot contracts. “It’s actually healthy for markets because it brings pricing imbalances back into balance,” he said.
A Columbia University study first published in November 2025 found that patterns seen as indicative of wash trading accounted for 60% of weekly volume in December 2024, falling to 20% by October 2025.
What to watch next
The report said Polymarket is seeking a valuation of above $20 billion, while Kalshi is discussing a raise at $40 billion. Both companies are also said to be considering going public as early as next year.
One near-term date to watch is Oct. 5, when Polymarket said its Ethiopia market would settle after the government chosen this summer is formally sworn in. More broadly, the key unresolved question is whether regulatory scrutiny turns into formal action or remains limited to review and public comment.
Source: As reported by Cierra Seay.
