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Points of Focus
- The CFTC issued a fresh advisory targeting deficiencies in prediction-market incentive program filings.
- Trading rewards can boost activity, complicating interpretation of headline market volume.
- Regulator has not alleged fake volume but demands clearer compliance disclosures.
Prediction markets are generating record trading activity, but US regulators are paying closer attention to one factor helping drive those numbers: Financial incentives offered to traders and liquidity providers.
The Commodity Futures Trading Commission’s (CFTC) Division of Market Oversight issued a fresh advisory on Aug. 12, specifically addressing market-maker, liquidity, trading, and other incentive programs operated by designated contract markets.
The CFTC said it has seen an increasing number of incentive-program filings, particularly involving event contracts, with procedural or substantive deficiencies. Those gaps can prevent regulators from determining exactly how programs operate and whether exchanges have adequately assessed compliance with CFTC requirements.
The advisory does not ban incentives. Instead, it requires exchanges using the CFTC’s self-certification process to provide adequate notice of program terms and explain how their structures comply with relevant core principles.
Why trading incentives matter for prediction market volume
The issue matters because some prediction-market rewards are explicitly designed to increase activity.
Kalshi’s Volume Incentive Program, for example, rewards eligible US users according to their share of trading volume during designated periods. If a trader generates 10% of qualifying volume in a $1,000 reward pool, that trader receives $100, subject to a maximum reward of $0.005 per contract. Kalshi states that the program is intended to encourage trading and make markets more active.
A separate Liquidity Incentive Program rewards resting orders based on their size and proximity to the best available price, with daily reward pools ranging from $10 to $1,000.
Both programs are scheduled to run through Sept. 1, although Kalshi can modify or terminate them.
That does not make the resulting volume illegitimate. Exchanges across traditional derivatives markets also use market-maker and liquidity incentives. But it means raw volume can reflect both underlying customer demand and economic rewards designed to stimulate trading.
CFTC scrutiny comes as prediction markets explode
The regulatory focus arrives as prediction markets move into mainstream-scale trading.
Kalshi processed around $27 billion during the 2026 FIFA World Cup while attracting 3 million users, roughly double the company’s initial expectations for both metrics.
The CFTC has simultaneously tightened several areas of prediction-market oversight. In July, it warned exchanges against overly broad template-style self-certifications for event contracts. The Aug. 12 advisory now applies similar scrutiny to the programs used to stimulate liquidity and trading activity.
For investors comparing Kalshi, Polymarket and newer competitors, the takeaway is not that headline volume is fake. It is that volume increasingly needs context: how much comes naturally from traders, how much is supported by incentives, and what those incentives actually reward.
As prediction markets grow, the CFTC appears increasingly focused on making that distinction easier to evaluate.
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