In this guide
Key takeaway: The CFTC has become the de facto US regulator for prediction markets since 2022. Platforms must register as Designated Contract Markets (DCMs) or face enforcement. Kalshi is the only fully compliant platform; Polymarket settled and geo-blocks US users.
Should you engage with prediction markets from within the United States — or are you thinking about starting — grasping the CFTC's role in prediction markets is absolutely essential. This regulatory body dictates which contracts remain lawful to trade, which venues permit such trading, and the specific requirements governing each transaction.
What is the CFTC?
The Commodity Futures Trading Commission serves as the principal US federal regulator overseeing commodity futures, options, and swaps. Prediction market contracts behave analogously to binary options and therefore come under CFTC authority whenever they are marketed to persons residing in the United States.
Key CFTC Enforcement Actions
Polymarket (January 2022)
Polymarket reached a settlement with the CFTC for $1.4 million following its operation of an unregistered event contract exchange. The settlement's principal components were:
- $1.4M financial penalty imposed by the CFTC
- Commitment to discontinue non-compliant contract offerings
- Implementation of geographic restrictions preventing US-based users from accessing the platform directly
Following this resolution, Polymarket has concentrated efforts on international expansion whilst investigating potential routes toward US regulatory compliance.
Kalshi vs. CFTC (2023-2024)
Kalshi, operating as a CFTC-registered DCM, initiated litigation against the CFTC after the regulator declined to approve its contracts tied to congressional outcomes. This pivotal legal decision determined that the CFTC lacks authority to impose categorical prohibitions on event contracts merely because they reference electoral processes — representing a significant victory for market participants. The DC Circuit's decision created opportunities for expanded event contract availability.
Nadex and Other Platforms
Nadex (North American Derivatives Exchange) has operated CFTC-regulated binary options for an extended period, encompassing certain event-based offerings. This operational model illustrates that compliant prediction markets remain achievable within the current US regulatory framework.
What Makes a Prediction Market Legal in the US?
Operating prediction market contracts lawfully for US residents requires platforms to:
- Obtain DCM registration from the CFTC
- Meet Core Principles — 23 operational standards encompassing market monitoring, financial safeguards, and trader protections
- Secure contract authorisation — each individual contract offering must undergo CFTC review and receive non-objection status
- Establish KYC/AML systems — customer identification and financial crime prevention frameworks
The "Gaming" Exception
The Commodity Exchange Act (CEA) restricts event contracts classified as "gaming" — a definition the CFTC applies expansively. Consequently, prediction markets centred on sporting events remain legally uncertain terrain. Historically, the CFTC has taken the position that sports-linked event contracts constitute gaming, although Kalshi's judicial success has introduced ambiguity into this interpretation.
What Happens if You Trade on Unregistered Platforms?
Retail traders themselves encounter limited enforcement exposure — the CFTC pursues platform operators rather than individual participants. Nevertheless, utilising unregistered venues introduces substantial risks:
- CFTC safeguards for customer assets do not extend to your holdings
- Your deposits lack segregation protections mandated by regulation
- The CFTC cannot intervene if the operator becomes insolvent or engages in misconduct
For comprehensive insight into jurisdictional frameworks worldwide, consult our 2026 global regulation guide. Prepared to participate on a properly regulated venue? Discover PolyGram's operational mechanics. Start trading on PolyGram →