According to OnLocationVacations, which has a solid track record for landing movie scoops, Stallone will play a member of the Nova Corps. Their anonymous tipster described his costume as looking "a lot like Judge Dredd." This likely refers to the Nova Corps, who wear a similar kind of helmet as their uniform.
Stallone was spotted near set last week, exiting the same Atlanta hotel that the movie's cast stays in with what appeared to be a script in hand, only to get in a car usually assigned to Chris Pratt. This sparked rumors that Stallone will appear in the film, though this has not yet been confirmed by Marvel Studios or director James Gunn.
OLV's report also claims that a scene involving Howard the Duck was shot sometime last week. The character -- who starred in his own notorious 1986 film -- appeared in a post-credits sequence during the first "Guardians of the Galaxy" film.