Crypto
Home›Crypto›Regulation›CFTC warns prediction markets about flawed incentives…
CFTC warns prediction markets about flawed incentives filings
The CFTC said incentive structures like stipends and rebates tied to market making could encourage fraudulent activity and manipulation.
The U.S. Commodity Futures Trading Commission issued new guidance warning prediction market platforms about compliance missteps tied to how they set up incentive programs to boost trading, according to CoinDesk.
The regulator said it has seen an increase in firms’ incentive-related filings that it considers procedurally or substantively deficient, which can prevent the CFTC from determining whether platforms provided adequate notice of program terms and properly evaluated compliance.
The CFTC also flagged market maker incentive programs, saying firms that encourage taking either side of a market can end up covering losses through stipends and rebates, a structure the agency warned could encourage fraudulent behavior and market manipulation.
The CFTC has played a major role in the U.S. prediction markets space, including pursuing a legal battle against states that sued prediction market firms over local sports gambling rules, and it proposed its first prediction markets rule in June.