CFTC targets prediction markets' volume-based incentives over wash trading risks. Exchanges face stricter self-certification rules for trading reward programs. Regulatory push follows prediction market trading volumes exceeding $25 billion.
Regulators are questioning whether the trading volume behind the prediction market boom reflects real conviction or manufactured activity. The Commodity Futures Trading Commission's Division of Market Oversight issued an advisory on August 12, reminding designated contract markets of their obligations when self-certifying market-maker, liquidity, trading, or incentive programs under Regulations 40.5 and 40.6. Alex Momot, co-founder of market maker Peanut.trade, told CCN the underlying activity on major platforms is largely organic, and that regulatory fragmentation, not manufactured volume, is the industry's real bottleneck.
The advisory responds to a rising number of incentive-program filings tied to event contract products that the agency says contain procedural or substantive deficiencies. Those gaps make it harder for CFTC staff to confirm that exchanges gave adequate notice of program terms or properly assessed compliance with core regulatory principles before rewards went live. Growth explains the urgency.
Trading volume across CFTC-registered prediction markets topped $25 billion in 2025, a small slice of the Commission's broader futures oversight but a fast-expanding one, and enough to draw sustained scrutiny into how that volume gets generated. Momot disputed the premise that incentive-driven trading explains much of the volume on major platforms. "On major prediction markets, almost all of the volume is genuine," he said.
"And we don't even need to analyze onchain activity to see that. We can simply look at how major countries have responded to platforms like Polymarket and Kalshi. Many have moved to restrict or ban them precisely because they saw significant domestic demand." He pointed to major events as evidence that the demand is real rather than engineered.
"When there is a major event, whether it's an election or a global sporting event like the World Cup, the volumes we see are real and organic," Momot said. In his view, the bigger problem is that "many regulators have simply banned them and pushed the question down the road" instead of building a coherent legal framework. Momot also pushed back on the idea that incentive programs could be quietly inflating headline figures at scale.
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