The U.S. Commodity Futures Trading Commission (CFTC) has issued new guidance aimed at improving compliance practices among prediction market platforms like Kalshi and Polymarket. The regulator has raised concerns about the adequacy of incentive programs being employed by these platforms, warning that insufficient compliance could lead to market abuse.
In its recent advisory, the CFTC highlighted a rise in submissions from event-contract platforms seeking to establish incentive programs. However, many of these submissions have been found to be either procedurally or substantively lacking, complicating the agency's ability to ensure that participants are well-informed about program terms and that compliance measures are effectively evaluated.
Particularly troubling are incentive structures that reward high-volume traders, which may inadvertently encourage manipulative trading practices such as wash trading or pre-arranged trading. The CFTC also expressed concern over market-maker programs that provide financial guarantees or rebates, as these could facilitate fraudulent activities.
