As with any regulated trading platform overseen by the Commodity Futures Trading Commission, prediction‑market operators seek to attract active participants and to serve as market makers, fostering greater involvement and transaction volume. However, the CFTC has expressed concerns about these practices, releasing guidance on Wednesday that addresses the issue.
The U.S. derivatives regulator warned that event‑contract platforms are submitting an increasing number of filings to support incentive programs, many of which are “procedurally or substantively deficient,” according to the guidance. This makes it difficult for the agency to determine whether the platforms have clearly disclosed program terms and sufficiently assessed compliance.
The CFTC noted that certain elements of these reward programs raise compliance concerns. In particular, incentives that reward high‑volume participants may prompt them to trade exclusively to meet volume thresholds, increasing the risk of wash trading, pre‑arranged transactions, or other fraudulent, manipulative, or disruptive activities.
Additionally, market‑maker programs that incentivize firms to act on either side of a market — often through stipends and rebates that guarantee net results or offset losses — pose further compliance risks, as the regulator warned they could foster fraudulent behavior and market manipulation.