Venables, one of two boys who abducted the two-year-old from a shopping centre in Bootle, Merseyside, in February 1993, was jailed for two years last July after pleading guilty to downloading and distributing indecent images of children.
The Parole Board has been considering the case for his release, but James's mother, Denise Fergus, wrote on Twitter: "good news all just heard venables is NOT getting released xxx"
The Parole Board had to decide whether Venables still posed a risk to the public and will have considered the nature of the offence, the prisoner's offending history, and his progress in jail.
It will also have considered any psychologists' reports, probation officers' reports, prison officers' reports, any statistical risk assessments that have been completed and the view of the Secretary of State.
The board also heard James's father, Ralph, describe the "daily nightmare" of life since his son's murder.
Speaking outside Liverpool Crown Court on Friday, Mr Bulger's solicitor, Robin Makin, said: "It's a daily nightmare for all of them. It still is. Things have not really got better."
Mr Makin said his client had been forced to re-live the details of the murder, including the torture and sexual abuse which James suffered at the hands of his killers.
"Ralph had to deal with that situation. It's a very stressful day for Ralph," Mr Makin said.
He added that Mr Bulger suffered depression, sleep loss, nightmares and post-traumatic stress.
Mr Makin said it had been an "extremely difficult situation".
The murder had "transformed" Mr Bulger, he added.
"Whereas Jon Venables... in a sense what they have been trying to do is transform him into somebody he really isn't," Mr Makin said.
A spokesman for the Parole Board said: "The Parole Board has now completed its review of the continued detention of Jon Venables in order to make recommendations to the Secretary of State as to his suitability for a move to open prison conditions or direct his release.
"A three-member panel of the board, chaired by a judge, held an oral hearing to review the case and come to a decision.
"That decision has been communicated to the two parties to the proceedings - the prisoner, the Secretary of State and also, via the Secretary of State, to the families of the victim in this case."
He went on: "It is the policy of the board not to comment on or confirm its decisions or reasons in individual cases.
"It is the duty of the Secretary of State to notify appropriate authorities who may have a role in supervising an offender in the community of the outcome of the Parole Board hearing."
Venables and Robert Thompson were 10 when they abducted James.
The pair walked the toddler several miles to a railway line in Walton, where they tortured and killed him.
They were convicted of murder and served eight years in prison before being freed and issued with secret new identities.
It was also revealed that Venables had sex with a woman carer at the secure unit where he was held as a teenager after James's murder.
Mr Makin also said the authorities had shown an "inability to cope" with putting a criminal like Venables back into society in an area adjacent to Merseyside.
The solicitor said: "It was crass and stupid. It was never going to work. Some of these concerns were raised 10 years ago."
He added: "The problem as we see it is this: the authorities don't really want to see Jon Venables for the person that he actually is."
He said not enough attention had been paid to the sexual element of the murder and that previous reports were "fundamentally flawed".
Mr Makin likened Venables to a half-bottle of "rotten wine".
"The authorities just don't want to see what is there - the sexual element, how that has undoubtedly scarred Jon Venables all his life and came to manifest itself later on.
"They don't want to see the rotting bit. They just look through the glass at the top and don't deal with it and that's not the way to deal with things."
Ms Fergus, who did not attend Friday's hearing, made a statement to the parole board in writing.
