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 contemplate doing so — grasping the CFTC's role in prediction markets is essential. This regulatory body dictates which contracts remain lawful to trade, which venues permit such trading, and what compliance standards apply.
What is the CFTC?
The Commodity Futures Trading Commission serves as the primary federal regulator overseeing commodity futures, options, and swaps throughout the United States. Because prediction market contracts operate much like binary options, the CFTC asserts authority over them whenever they are made available to American participants.
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 agreement's principal components were:
- $1.4M civil monetary penalty
- Agreement to wind down non-compliant markets
- Geo-blocking US users from direct platform access
Following this settlement, Polymarket has redirected its efforts toward international markets whilst investigating potential compliance pathways within the United States.
Kalshi vs. CFTC (2023-2024)
Kalshi, which holds CFTC registration as a DCM, initiated litigation challenging the CFTC's rejection of its congressional control contracts. This pivotal ruling determined that the CFTC lacks authority to impose a categorical prohibition on event contracts merely because they concern political elections — a significant advancement for market participants. The DC Circuit Court decision expanded possibilities for additional event contract categories to be offered.
Nadex and Other Platforms
Nadex (North American Derivatives Exchange) has supplied CFTC-regulated binary options for an extended period, encompassing certain event-focused contracts. This operational model illustrates that compliant prediction markets remain achievable under current American regulatory frameworks.
What Makes a Prediction Market Legal in the US?
Operating prediction market contracts lawfully for American participants requires a platform to:
- Register as a DCM with the CFTC
- Comply with Core Principles — 23 requirements covering market surveillance, financial integrity, and customer protection
- Obtain contract approval — each new event contract type must be submitted and not objected to by the CFTC
- Implement KYC/AML — know-your-customer and anti-money-laundering protocols
The "Gaming" Exception
The Commodity Exchange Act (CEA) restricts event contracts tied to "gaming" — language the CFTC interprets expansively. Consequently, sports-based prediction markets remain contested territory. Historically, the CFTC has maintained that sports event contracts qualify as gaming, though Kalshi's judicial triumph has complicated this interpretation.
What Happens if You Trade on Unregistered Platforms?
End users encounter minimal direct enforcement exposure — the CFTC pursues venues rather than individual traders. Nevertheless, participation on unregistered venues carries significant drawbacks:
- No CFTC customer protection rules apply to your funds
- No segregated account requirements for your deposits
- No CFTC recourse if the platform fails or acts fraudulently
For a broader look at global rules, see our 2026 global regulation guide. Ready to trade on a platform with proper risk controls? Learn how PolyGram works. Start trading on PolyGram →