Kalshi, Polymarket trading volumes on some products raise questions amid

Trading volumes for certain products on prediction market platforms Kalshi and Polymarket are raising questions from some industry observers, who fear the numbers may be inflated.

On Polymarket, observers have flagged a quirk on the company’s international exchange, which is not overseen by U.S. regulators: Markets that feature multiple contracts will see greater activity on those with lower odds of occurring versus those with higher probabilities. It’s seen on markets related to elections, sports and central bank decisions. 

Meanwhile, a user on X on Sept. 20 flagged a strange pattern on Kalshi’s perpetual futures market for the ether cryptocurrency. Trades of around $5,500 made up a large share of transactions on the contracts, and that 24-hour trading volume was abnormally high compared with actual resting liquidity. A CNBC analysis found that on Sept. 20, nearly half of the dollar volume traded on Kalshi’s ether perpetuals came from trades sized between $5,495 and $5,505.

Both developments create concerns among some observers that the companies are overseeing inflated volumes or, at worst, are experiencing wash trading, in which traders collude to buy and sell an asset to create a false sense of economic activity. 

Both Kalshi and Polymarket deny wash trading occurs on any of their products. They also deny that the respective patterns represent inorganic activity.

A designated contract market, the type of exchange prediction markets are, “has a duty to protect market integrity by monitoring market conditions, price movements, and volumes in real time for abnormalities,” said Tamika Bent, a partner at K&L Gates. While she said the patterns described here don’t alone establish misconduct by an exchange, she added observers would “expect DCMs to be surveilling unusual volume and looking into any signs of market disruption.”

Polymarket is currently raising at a valuation north of $20 billion in the private market after the launch of its U.S. exchange in May, while Kalshi is reportedly in talks to raise funds that would value the company at $40 billion following its perpetual futures product debut in June. Both have used surging trading volumes as a metric to underscore the exchanges’ growing popularity, helping justify those valuations.

But as the companies reportedly explore moves to the public markets as soon as next year, the accuracy of these volume figures is in the spotlight.

“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,” Andre Guettler, a professor of finance at Ulm University in Germany, wrote in a working paper regarding the patterns on Kalshi’s perpetual futures’ volume. “This distinction matters most for retail investors, who are the natural buyers of a prediction-market exchange at a public listing.”

Polymarket’s head of…