Quick answer
Wash trading: Wash trading is trading with yourself (or a coordinated partner) to create the appearance of activity without taking real market risk; it inflates reported volume and is prohibited under the US Commodity Exchange Act.
Also called: round-trip trading
Explained, with an example
The CFTC glossary defines wash trading as transactions that give the appearance of purchases and sales without incurring market risk or changing the trader's position [1]. For data users it means headline volume is a weak quality signal; prefer depth and spread. The CFTC's 2026 prediction-markets advisory addresses manipulation and insider trading in event contracts [2].
Frequently asked questions
What is wash trading?
Wash trading is trading with yourself (or a coordinated partner) to create the appearance of activity without taking real market risk; it inflates reported volume and is prohibited under the US Commodity Exchange Act.
About this guide
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Author: Ken Lin · Corrections: if you spot an error, we review it and date-stamp the fix.
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Sources
- CFTC Glossary (binary option, DCM, order book, liquid market, market maker, settlement, wash trading, arbitrage, hedging) — U.S. CFTC, accessed 2 Nov 2026
- CFTC Enforcement Division Issues Prediction Markets Advisory (Feb 2026) — U.S. CFTC, accessed 2 Nov 2026