CFTC warns prediction markets on faulty incentive filings

The Commodity Futures Trading Commission (CFTC) has raised concerns about the incentive programs used by prediction markets to boost trading volume. In guidance issued on Wednesday, the CFTC noted an increase in filings that are often deficient, hindering the agency's ability to assess compliance with program terms. The CFTC highlighted that some reward structures could lead to compliance issues, as they may incentivize high-volume traders to engage in practices like wash-trading or market manipulation. Additionally, market-maker programs that offer stipends or rebates to cover losses could also encourage fraudulent behavior. The CFTC has been actively involved in regulating U.S. prediction markets and has proposed rules to guide the industry, including a warning last month against shortcuts in contract certifications.

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