Kalshi’s Crypto Perpetuals Spark a Warning Over On-Chain Liquidity

Kalshi’s crypto perpetual futures lineup, including new contracts on Ethereum, XRP and Solana, has processed more than $16 billion in trading volume since Bitcoin perpetuals debuted in late May. Imran Khan, co-founder of the crypto accelerator Alliance, argues that success is draining liquidity from the open blockchain networks crypto was built to run on.

Khan didn’t name Kalshi in his post on X. The timing gave it away: his remarks landed days after the CFTC-regulated exchange rolled out Ethereum, XRP and Solana perpetuals within a single week. His argument turns on where crypto’s settlement data ends up once a trade closes, and who gets to build on top of it afterward.

Khan’s Post Lands Days After Kalshi’s Triple Launch

The rollout moved fast. The Commodity Futures Trading Commission (CFTC, the federal regulator overseeing U.S. derivatives markets) cleared Kalshi’s Bitcoin perpetual contract on May 29. Ethereum followed on June 4. A Hyperliquid-token contract landed June 9, and XRP and Solana went live June 10.

• Bitcoin (BTC) – approved May 29, the first regulated U.S. perpetual futures contract
• Ethereum (ETH) – launched June 4 under Kalshi’s American Perpetuals branding
• Hyperliquid (HYPE) – cleared for its own contract on June 9
• XRP and Solana (SOL) – both went live June 10
• Stellar, Dogecoin, Shiba Inu and Hedera – filed and still moving through individual CFTC review

Khan made his case in a post arguing the shift favors closed ecosystems.

Personally, I think Kalshi’s products are net negative for on-chain liquidity.

Khan, who co-founded the crypto accelerator Alliance, wrote in the same post that every product Kalshi launches “pulls trading liquidity off chain rather than onchain.” He argued the exchange’s derivatives operations draw users and funds away from decentralized venues, naming Hyperliquid and Polymarket specifically as the platforms losing ground.

The Second-Order Effect Behind Khan’s Warning

Khan’s sharpest point concerns what happens to trading activity once a position closes. Decentralized finance works best when positions, liquidity and users stay on public blockchains, he argued, because outside developers can then build directly on top of that activity. Move it behind a closed platform’s own books, and that option disappears.

“The second order effect is that less liquidity and user activity become composable with the rest of crypto,” Khan stated. When trading happens on open networks, he added, “other apps can build on top of it, integrate it, and create new products.” Off-chain, he warned, “those network effects are harder to capture.”

The distinction matters mechanically too. Kalshi’s own rebalances funding rates three times daily inside its own system, using CF Benchmarks pricing rather than a public, on-chain oracle that other applications could read and build against.

Is Kalshi’s Volume Actually Coming From On-Chain Markets?

Not yet, at meaningful scale. Kalshi’s crypto perpetuals lineup is growing fast, but Hyperliquid alone handled $219 billion in total volume in March, and the broader offshore perpetuals market Kalshi is chasing topped $90 trillion in 2025.

Kalshi’s own numbers show the trajectory. Crypto perpetuals added $5.5 billion in trading volume in their first two weeks alone. By the time Reuters checked in with the company in July, that cumulative total had nearly tripled, with much of the added activity coming from institutional players rather than retail traders.

Context matters here. Total open interest, the value of unsettled positions across all exchanges, ran well ahead of anything Kalshi has captured: Bitcoin alone carried $54.9 billion in unsettled trades, followed by Ethereum at $31.5 billion, Solana at $5.5 billion and XRP at $3 billion. Pew Research Center’s analysis of prediction-market data found combined monthly volume across Kalshi and Polymarket climbed to about $24 billion monthly by April, up from under $5 billion the previous September, a growth curve Kalshi’s crypto push is riding rather than driving alone.

Hyperliquid and Polymarket Still Hold the Infrastructure Edge

Kalshi and Polymarket both built their businesses on event contracts that settle once and close. Neither had run a high-frequency, continuously repriced product before this year, and their systems have never faced the volatility spikes that are routine on perpetual futures venues.

Hyperliquid’s structural advantage is cross-margining. A trader there can hold a Bitcoin perpetual, a spot position and an event contract inside the same collateral pool, letting gains in one offset losses in another. Kalshi and Polymarket lock user funds until an event settles, so a crypto perpetual position and a prediction market bet can’t share margin the way they can on Hyperliquid.

That gap shows up in usage patterns too. Polymarket’s monthly active users peaked near 321,500 during the 2024 election before dropping 25% within three weeks, and the platform is a venue where 75% of users churn within 90 days, according to Dune data. Kalshi hasn’t published comparable retention figures for its new perpetuals traders.

Duffy, Khan and Kalshi Don’t Share the Same Worry

Khan isn’t the only person raising concerns about Kalshi’s crypto perpetuals, though the objections don’t line up with each other.

• Imran Khan, Alliance’s co-founder, says the products are net negative for on-chain liquidity because settlement and composability move off public blockchains.
• Terry Duffy, CME Group’s outgoing chief executive, calls the contracts a disaster waiting to happen, arguing they resemble swaps more than futures and expose retail traders to outsized leverage.
• Kalshi, through chief risk officer Udesh Jha, frames the same products as bringing offshore risk onshore under CFTC supervision, with pricing transparency traders can’t get offshore.

Duffy went public with his objection on June 4, the same week Ethereum perpetuals launched, calling Kalshi’s contracts “a disaster waiting to happen” for unsophisticated retail traders. His argument is regulatory rather than structural: perpetuals behave like swaps, which fall under different rules than futures, and a CFTC reclassification could upend Kalshi’s product line overnight. Kalshi’s BTCPERP contract caps leverage around 10x, well below the 40x or higher common on offshore exchanges, a gap regulators built in deliberately.

Kalshi has marketed the launch as an American first. That claim needs a caveat: the CFTC granted similar permission to Bitnomial in December 2025, under then-chair Caroline Pham, months before Kalshi’s contracts went live.

Kalshi Is Already Betting the Model Extends Past Crypto

Kalshi isn’t slowing down to answer the criticism. The exchange is now in talks with the CFTC to list perpetual futures on gold, foreign exchange and energy markets, extending a playbook it built in crypto to traditional assets entirely.

“Gold is something that’s coming up because it’s retail-friendly,” said Udesh Jha, Kalshi’s chief risk officer. “Our participants skew towards the retail side but also institutional.”

That expansion is what worries Khan longer term. “Over time, I suspect many successful onchain products could be replicated offchain via Kalshi or others,” he wrote, warning that regulated platforms could copy crypto’s most popular consumer products without the open infrastructure underneath them. Strategy co-founder and executive chairman Michael Saylor took the opposite view of the broader push, calling regulated access to perpetual futures good for Bitcoin holders.

Kalshi’s regulatory footing remains a live fight elsewhere. The CFTC sued New Mexico in June, the eighth state it has taken to federal court over efforts to apply gambling law to Kalshi’s sports contracts. “New Mexico is the latest state seeking to nullify black letter law and decades of judicial precedent by imposing state gaming laws on federally regulated derivatives exchanges subject to the CFTC’s exclusive jurisdiction,” the eighth state sued over jurisdiction saw CFTC Chairman Michael Selig say in the agency’s announcement.

Not every ruling has gone Kalshi’s way. Three weeks after Khan’s post, a federal judge in New York denied Kalshi’s request for a preliminary injunction against the state’s gaming commission on July 7, a reminder that the jurisdictional fight is still unsettled in both directions.

Even Khan isn’t certain where the liquidity ends up once the dust settles, on public blockchains or inside Kalshi’s own order book.

Disclaimer: This article is for informational purposes only and does not constitute financial or investment advice. Crypto perpetual futures involve significant leverage and risk of loss. Figures are accurate as of publication and may change; consult a licensed financial professional before making trading decisions.