Original | Odaily Planet Daily
Author｜Golem
On September 29, foreign media reported that the U.S. Commodity Futures Trading Commission (CFTC) is investigating the reward program of prediction markets due to concerns that prediction markets use misleading publicity/promotions to attract traders. One source said the findings could include a targeted review of prediction markets or a direct enforcement investigation, and while CFTC Chairman Michael Selig has not yet decided on specific options, some kind of "action" is expected by the end of the week.
Prediction market platform Kalshi has terminated its trading volume incentive program, while Polymarket and other prediction markets that rely on rewards to maintain platform liquidity depth and user growth may become a key target of the CFTC. As for what led to the CFTC’s action, it was allegedly because the CFTC believed that prediction market companies were not taking the compliance advisory it issued in August…
CFTC’s regulatory opinions on prediction markets
On August 12, the CFTC issued an advisory opinion on the prediction market reward program, specifically focusing on market making, liquidity, trading and reward program filing for prediction markets. In the document, the CFTC emphasized that prediction market companies are trying to encourage heavy traders and encourage companies to serve as market makers in the hope of expanding market participation and trading volume, and that there may be compliance issues in these reward programs.
In addition to cashbacks for signing up and offering “guaranteed profits” promises, the CFTC warns that some incentives for high-volume market participants can also increase false trading, and that market maker incentive programs can also encourage fraud and market manipulation.
It’s not entirely to blame that prediction market companies don’t take the CFTC’s opinions seriously. For prediction market platforms such as Polymarket, order liquidity and position rewards, new user subsidies and recommendation rewards are the main strategies to increase market depth and user growth. Sometimes, in order to make prediction contracts in a certain field (such as sports competitions) more liquid, project parties will even sign private contracts with market makers.
In the fierce market competition, no one dares to voluntarily give up these measures, because once stopped, the depth of contract liquidity and user experience may deteriorate, leading to the loss of users.
It’s unclear which companies will be affected by the CFTC’s impending action, but prediction market platforms such as Kalshi and Polymarket that operate in the United States are offering incentives that could attract the regulator’s attention.
Polymarket may become the focus of the CFTC. According to polyscalping data, since Polymarket started charging transaction fees in January 2026, it has generated a total of US$229 million in transaction fees, and the cumulative rewards issued by Polymarket have reached US$128 million, accounting for 54.3% of transaction fees.
Polymarket Rewards Program Spends Millions Every Day
Polymarket is one of the most liquid prediction markets currently on the market, and the price it pays for this is to spend millions of dollars every day to maintain the depth of liquidity.
According to DeFiLlama data, Polymarket 24H ranks fifth in blockchain fees at $3.21 million, about $1 million higher than sixth-place Hyperliquid. However, Polymarket 24H’s revenue is only about $400,000, ranking only 16th in the industry. This means that about $2.8 million was awarded to platform traders and market makers in various forms.
Polymarket 24H Fee and Revenue Ranking Comparison
The Polymarket platform reward program mainly has 5 channels, namely LP Rewards, maker rebates, taker rebates, holding rewards and referrals. LP rewards will be implemented from November 2023 (Odaily note: Polymarket has not started charging fees at that time); position rewards will be implemented from July 2025, mainly the annualized income of holding pUSD; order rewards, taker rewards and recommendation rewards will all start this year.
A total of approximately US$128 million has been distributed through the five types of reward channels. The proportion and specific amount are as follows.
In May of this year, Polymarket opened Perps trading, and also launched the Perps liquidity reward program in order to quickly accumulate liquidity depth. The Perps liquidity reward budget is fixed at US$75,000 per day, which is distributed among active perpetual markets. At this pace, the annualized expenditure for this alone reaches US$27 million.
The above are just Polymarket's regular reward programs. During some special events and competitions, Polymarket will also launch additional reward programs to encourage traders and market makers to participate.
For example, during the crypto TWAP transition period in August this year, Polymarket provided the market with an additional $1 million in liquidity rewards; during the World Cup and popular events, Polymarket will also increase additional event incentives. In the March Madness event of Polymarket US Station Sports, the single-game liquidity reward reached $100,000.
Use money to grow hundreds of thousands of users
These reward programs not only maintain the depth of liquidity on the Polymarket platform, but also play a significant role in user growth. According to Dune data, Polymarket's new user growth suddenly accelerated in the early months of 2026, which coincided with the launch of various reward programs.
In January 2026, the number of new monthly users of Polymarket reached 233,000. This was the first time that Polymarket exceeded 200,000 since January 2025 (the month when Trump was elected president). This time coincided with the launch of Polymartket’s pending order reward program; in March 2026, the number of new monthly users of Polymarket reached a new high of 259,000. This time also coincided with the launch of Polymarket’s referral reward program.
Of course, Polymarket's explosive growth in new users is not determined by the reward plan alone. Of course, it is also affected by factors such as mature supervision, expanded advertising and marketing, and occasional development opportunities (such as the World Cup). However, judging from the degree of time overlap, the various reward programs launched by Polymarket this year have a strong correlation with user growth.
Will Polymarket be involved in regulatory whirlpool again?
In summary, the reward program is crucial to the business operations and user retention of the Polymarket platform. If the CFTC takes substantial action to rectify the prediction market reward program, Polymarket, as the prediction market company with the largest reward amount and proportion in the market, will be the first target of attention.
Kalshi, who focuses on compliance narratives and has a keen "political sense", is already withdrawing from the transaction volume incentive plan. On September 28, Kalshi submitted a document to the CFTC stating that the end date of the platform’s trading volume incentive plan would be changed from October 1, 2027 to October 13, 2026. The document did not explain Kalshi’s reasons for this decision.
In mid-to-late September, some users discovered that the ETH perpetual contract transactions on the Kalshi platform had a wash volume behavior of "5,500 US dollars in transactions." For many days in a row, transactions of approximately 5,500 US dollars accounted for 50% of the ETH perpetual notional volume. This is the typical pattern of false trading in the prediction market named in the document released by the CFTC in August. Therefore, there is reason to believe that Kalshi’s sudden announcement of the trading volume incentive plan was to avoid regulatory investigation.
I'm afraid it will be difficult for Polymarket to stop like Kalshi. For Polyamrket, the reward program has been deeply embedded in its liquidity and user growth system. Once the reward pairs are significantly reduced or stopped, it will lead to a withdrawal of liquidity, market makers reduce the depth of quotations, the bid-ask spread in popular markets will expand, and the long-tail market may even lose enough counterparties.
Polymarket’s future situation will be highly dependent on the CFTC’s interpretation of the prediction market reward program, if the regulator insists on treating “transactions by users to obtain rewards” as inauthentic transactions. Then following insider trading, Polymarket may be involved in the regulatory vortex of false transactions and fraudulent transactions caused by reward programs.