The federal regulator of prediction markets is reminding its licensees that there are no sure things in life, including in the business of sports event contracts.
- CFTC staff warned prediction markets against promising “risk-free” incentives, unlimited payouts, or promotions that could guarantee profits or offset losses.
- The agency also cautioned against selective perks and randomized rewards that could give some traders unequal access or create market distortions.
- The advisory comes as sports prediction markets rapidly grow and face scrutiny from state gambling regulators, who argue the exchanges resemble traditional sports betting.
CFTC staff issued an advisory on Wednesday reminding so-called designated contract markets (DCMs) “of their regulatory obligations” when self-certifying rules for market-maker, liquidity trading, or “incentive programs.”
The advisory noted that DCMs (which would also mean prediction markets) have historically offered incentives, such as to nudge market makers to provide quotes for both sides of a market.
However, CFTC staff say they’ve seen an increase in incentive program rule filings tied to event contracts, including ones that “are procedurally or substantively deficient.”
“Such deficiencies can impede staff’s ability to evaluate whether DCMs have provided adequate notice of program terms and have sufficiently assessed compliance with core principles and other Commission requirements,” a press release said.
As a result, the advisory was issued to point out some recurring problems and other items that prediction markets should either consider or reconsider.
Maybe it's time to reconsider
Some of those reminders were for incentives that could be aimed at traders, the people who buy and sell the “yes” or “no” contracts offered by prediction market operators. And, according to the CFTC, some of the offers being made by prediction markets could violate certain rules.
“DCMs are encouraged to consider whether certain categories of incentive programs incentivize impermissible trading behaviors, render listed contracts more susceptible to manipulation, or contribute to market distortion,” the advisory said.
Among other things, the CFTC staff said prediction market operators “should avoid the use of disproportionate or unlimited payouts, such as those structured to guarantee profits, offset losses, or significantly exceed transaction costs (e.g., through use of unlimited rebates, ‘risk-free’ trades, market-maker stipends).”
These, the advisory said, “may undermine bona fide risk transaction activity,” as well as a prohibition on “guarantees.”
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Sweeping up the place
The CFTC advisory also noted that one core principle requires that prediction markets provide traders with “impartial access” to their markets and services.
Selectively offering “retention bonuses or providing non-cash incentives of unspecified or varying value” could go against that, staff warned.
“Sweepstakes-like or randomized rewards programs or prizes based, in whole or in part, on pure chance, rather than pre-defined performance metrics, likely run afoul of Core Principle 2 because they introduce unequal and non-objective benefits that treat market participants within the same category differently,” the advisory added. “Further, DCMs should likewise ensure that they do not introduce unequal trading conditions through selectively available perks, such as faster market data or enhanced application programming interface access.”
Wednesday’s advisory is another attempt by the CFTC to firm up or further explain the rules around prediction markets, and it comes as the federally regulated exchanges continue to grow and add customers.
That growth has largely been driven by the sports event contracts the exchanges began offering in late 2024. To a growing number of state gambling regulators, the buying and selling of those contracts looks like sports betting, and there continues to be a ton of litigation over their legality.
We have officially speed-run our way to the "drop the 'risk-free' talk" stage of prediction market regulation. From today's CFTC Staff advisory: pic.twitter.com/9B2bAigBEW
— Geoff Zochodne (@GeoffZochodne) August 12, 2026
Some of what the CFTC has done recently could be viewed as the agency trying to stop prediction markets from looking too much like sports betting.
The mention of "risk-free" trades is something that has echoes of state-regulated sports betting, as it is a term regulators and lawmakers have sought to outlaw in sportsbook marketing.
Furthermore, the CFTC has recently proposed rules that intend to cover the sports event contracts offered by prediction markets, and address any potential conflicts of interest caused by “vertically integrated market structures,” such as when an exchange owns a market-making firm as well.
The CFTC also recently cautioned prediction markets against showing “bookmaker-style odds” to customers, saying it was likely to “mislead market participants about the nature of the transaction into which they are entering.”
“Further, market participant confusion between the two products could be exploited to drive participants into higher-margin, non-market-priced bookmaking products,” the agency warned.
