Kalshi's Andy Ross defends wash-trading claims as Ethereum push nears $2,700

Kalshi's Andy Ross answers wash-trading allegations

The hosts opened by pressing Kalshi's head of institutional business, Andy Ross, on a Wall Street Journal report and an anonymous account alleging wash trading on the platform's perpetuals markets. Ross rejected the characterization, arguing that tight market-maker spreads combined with very low fees mean "the fastest guy trades with the slowest guy at the new price," which he called "an efficient market," not manipulation.

Asked about the recurring roughly $5,500 order size flagged in public data and allegations of negative fees or rebates, Ross said all fee structures are public and that Kalshi, as a CFTC-regulated designated contract market, performs full KYC and would find and stop wash trading if it existed, since it is "not allowed under the CFTC rules." He declined to confirm which firms, including Jump Trading, act as market makers, but defended the model of trading via a central limit order book against a clearing house rather than a peer-to-peer wallet system.

"That's what markets work. Now the fact then that a market maker gets put into a position... eventually that market maker goes, well, I don't want to hold that position. I'm going to have to sell it."

— Andy Ross

On the broader business case for prediction markets, Ross cited a Federal Reserve paper he said found Kalshi pricing more accurate than Wall Street models, giving as an example that Kalshi priced only an 18% probability of a July rate hike versus 44% on CME FedWatch, with the Fed not raising rates. He also said 25.6% of traders make money versus 74.4% who lose, per a Wall Street Journal figure discussed on the show, and argued a Supreme Court case on federal versus state regulation of prediction markets is "an inevitability."

Why the Clarity Act collapsed, according to Tyler Gellasch

Tyler Gellasch, who runs the investor-focused nonprofit Healthy Markets and previously worked on Dodd-Frank as Senate counsel, walked through what he called a "poor man's Tik Tok" version of the Clarity Act's failure. He said the bill moved through the House without serious refinement, then reached a close bipartisan deal in the Senate by around September to January, negotiated with a group of Democrats he called the "cryptocurious Dems."

He said that deal fell apart after an ex-post objection from a prominent crypto industry figure, whom he did not name in this passage but referenced as posting reasons for opposing the bill, with the top objection being that it effectively banned tokenized stock trading by requiring "regulatory parity" between tokenized and traditional stocks. Gellasch said he had never before seen a Senate markup pulled because of a market participant's objection.

"I don't know what other reasons, right? But what I do know is that was a big one."

— Tyler Gellasch

Gellasch also pointed to Trump's personal financial ties to the industry and primary-season backlash, citing Angie Craig's primary loss to Peggy Flanigan, who campaigned against digital assets, as evidence that support was eroding on the Democratic side. He argued Senate Republican leadership ultimately preferred a partisan failed vote, since the SEC and CFTC, run without Democratic commissioners, could grant industry favorable treatment faster via exemptive orders than Congress could via legislation, though he warned such orders could later lose in court.

Gellasch's warning on tokenization rules and perpetual futures

Gellasch said he supports tokenization in principle but not the SEC's recent exemptive order, which he described as granting broad relief from securities rules to exchanges and market makers handling tokenized stocks without the usual notice-and-comment rulemaking process. He said the underlying token definition is strict, but the intermediaries handling it are exempted from rules that normally link stock and derivative markets together via data and regulation.

He argued existing frameworks, cited as work by the DTCC and more than 50 firms, could support compliant tokenization with only minor adjustments, and predicted that if industry challenges the SEC's exemptive order in court, the SEC would lose, and that CFTC perpetual futures orders will also face lawsuits and likely lose.

"If this current trajectory holds and we see perpetual futures in individual stocks and S&P be traded at the CFTC without the SEC's oversight... it's definitely under 10 [years]. We have a broad stock market collapse."

— Tyler Gellasch

He said single-stock perpetual futures lack any regulatory home built for retail use, since Dodd-Frank's swap rules assumed institutional-only trading, and called for a version of oversight, covering advertising, custody and leverage, rather than an all-or-nothing approach.

Joseph Chalom's case for Ethereum as a "trust commodity"

Sharplink CEO Joseph Chalom, formerly of BlackRock where he helped launch IBIT and ETHA, argued Ethereum should be viewed less on current fee revenue and more on its role underpinning stablecoins, tokenized real-world assets and DeFi. He said Ethereum holds over 50% of stablecoin activity and tokenized real-world-asset activity, and roughly eight to nine times more DeFi TVL than competitors, calling it "the settlement layer for almost all of finance."

He described Ethereum as a "trust commodity," arguing institutions care about security, trust and liquidity, and that Ethereum dominates on all three, comparing it to how Amazon and Uber were misjudged early for weak near-term economics while building lasting market position.

"In the future it'll be ether as the trust commodity that's securing transactions and as that happens more value will endure to ether the token, just wait and watch."

— Joseph Chalom

Referencing a BlackRock research paper, Chalom said agentic commerce requires machine-native payment rails such as stablecoins, and that compute is emerging as a new market for digital assets. He estimated agents could eventually touch about $4 trillion of financial fees, much of which he expects to go to zero or shift to disruptors like Stripe, Coinbase, Binance and Robinhood, with Ethereum's burn mechanism potentially benefiting from rising transaction volume. He compared Ethereum to a toll road, citing BlackRock CEO Larry Fink's description of it as "the toll road to tokenization," and said the technology's decentralization gives it an ownership structure the original internet lacked.

Peirce's KYC comments land beside the Bitget hack

The hosts discussed SEC Commissioner Hester Peirce's comments that mandatory KYC data collection creates "honeypots" of personal information, and her advocacy for zero-knowledge proofs that let users prove eligibility, such as citizenship or age, without revealing underlying data. They said sources indicated the SEC may be preparing to allow a single KYC credential, verified once at an issuer level, to be reused across tokenized-securities trading venues via ZK technology, though they stressed this was described as a rumor rather than confirmed policy.

The hosts noted the timing coincided with news that Bitget was drained in a hack, with Bitget's CEO Gracie Chen confirming a total they put at $385 million from hot wallets, which they said was tied on-chain to Lazarus Group addresses and stemmed from a phishing-based security key compromise rather than a blockchain flaw.

Separately, the hosts read out Peirce's resignation letter, in which she said she would step down as SEC Commissioner effective October 2, describing her nine-year tenure as "the honor of my professional lifetime" and expressing confidence in Chairman Paul Atkins and Commissioner Mark Uyeda to continue the agency's work. They noted she plans to join Regent University School of Law as an associate professor in November, and credited her with prior work on tokenization exemptions and past appearances on the show.

Market moves: privacy coins, DeFi and a Litecoin pop

The hosts described a broadly green board heading into the weekend, highlighting NEAR's continued strength alongside Ethena, Backpack, Zama (up 57.5% on the week by their figure), and DeFi names including Aerodrome, Morpho, Uniswap and Aave. They flagged Litecoin's roughly 20% weekly move and Hyperliquid trading roughly flat to slightly down on the week, which they attributed to the token's price being tethered to exchange volume and fee revenue rather than speculative flows.

They discussed Binance's spot listing of HYPE, noting the token fell from about 97 toward 90 shortly after listing, which one host called an "insta nuke." They also read out a lawsuit filed against LayerZero and co-founder Bryan Pellegrino relating to an exploit of an RSC bridge, though they said they had not fully read the filing and speculated it concerned defamation or security-practice claims.

"I think there's going to be flows into the beta of the category, which is why I think privacy and AI are flying."

— the host

The hosts said they would like to see market data broken into categories, privacy (Zcash, Near, Zama, Fala), AI/compute (Akash, Bittensor) and DeFi/dinocoins, to better track rotation, and debated whether Zcash remains the strongest asset to price other tokens against given its multi-month outperformance versus Bitcoin.

Tokenized equities and the "financial export" thesis

Discussing a Backpack thesis piece, the hosts argued the US has spent decades exporting the dollar as its main financial product and is now extending that model to tokenized equities, framing US stocks as a new export that could let other countries earn yield in dollar-denominated equities rather than local currency or dollars alone.

"Crypto means tokenized equities now."

— the host

They tied this to Gellasch's earlier caution that many tokenized stock products are structured as equity-linked debt instruments without full shareholder voting or governance rights, and to their own observation that a large share of current on-chain traders are motivated more by volatility and speculation than long-term portfolio construction, leaving open whether retail demand for full shareholder rights will grow as tokenization scales.