Kalshi is ending its Volume Incentive Program, which paid participants based on their share of volume, according to a Sept. 28 self-certification filing with the Commodity Futures Trading Commission.
The termination takes effect no earlier than Oct. 13 according to the filing, which was first reported by Dan Bernstein of Sportico.
The program had been slated to end on Oct. 1, 2027. Kalshi did not provide a reason for the termination, citing its rule that it can “modify or terminate such programs as the Exchange determines in its sole discretion.”
Kalshi volume incentives explained
Kalshi’s Volume Incentive Program was filed with the CFTC in February 2023 and launched that March. The program’s purpose, according to the latest filing:
The purpose of this Program is to increase volume and liquidity on the central limit order book and thereby enhance pricing efficiency. More volume and liquidity on the central limit order book and more efficient pricing benefit all participants in the marketplace.
The program was open to all Kalshi members except affiliates, members who signed a Market Maker Agreement, and introducing brokers, futures commission merchants and their non-disclosed customers when trading through them.
Under the program, Kalshi set a fixed reward for each eligible market over a term of up to 31 days. At the end of each term, eligible traders received a share of that reward proportional to their trading volume in the market compared with all other eligible volume.
Only trades on the exchange’s central limit order book priced between $0.03 and $0.97 counted toward eligible volume, though that price range did not apply to perpetual futures. To help avoid price distortion, the terms capped rewards for event contracts at $0.005 per contract traded for each participant.
Outside pressures
The termination comes as federal regulators take a closer look at prediction market incentive programs.
In August, the CFTC issued an advisory “to remind designated contract markets of their regulatory obligations under the Commodity Exchange Act.” The advisory laid out “staff expectations regarding both procedural and substantive content” for incentive program submissions.
The CFTC has reportedly grown “frustrated” with prediction markets that haven’t complied with the advisory, and Chairman Michael Selig could take “action” as soon as this week, according to Front Office Sports.
Wash trading allegations
Some of the incentive-based programs could heighten “risks of wash-trading,” the August advisory read, which Kalshi faced questions about earlier this month.
The Wall Street Journal reported that nearly 1 million trades of almost identical size, totaling more than $5 billion, had flowed through Kalshi’s ether perpetual futures market since August. The filing does not tie the termination to that activity.
Kalshi denied that it was wash trading, saying in a blog post that the repeated trade sizes reflected a market maker’s fixed size resting orders being hit by faster traders.
“It is worth re-iterating that wash trading is explicitly banned in our rulebook,” the company wrote. “We are regulated. We know who is trading. We mechanically block self-trades, and have surveillance watching for pre-arranged trades with a partner. We’ve seen no evidence of collusion or wash trades.”
