In this guide
Key takeaway: The CFTC has emerged as the primary US regulator overseeing prediction markets from 2022 onwards. Platforms seeking to operate legally must obtain registration as Designated Contract Markets (DCMs) or risk regulatory action. Kalshi stands as the sole fully registered compliant operator; Polymarket agreed to a settlement and restricts US customer access.
Should you engage in prediction market trading from within the United States — or contemplate doing so — grasping the CFTC's oversight of prediction markets represents an essential requirement. This regulatory body dictates which contracts remain lawful to trade, which venues may offer them, and what operational safeguards must exist.
What is the CFTC?
The Commodity Futures Trading Commission serves as the federal regulator governing commodity futures, options, and derivatives transactions across US markets. Because prediction market contracts operate much like binary options contracts, they trigger CFTC authority whenever offered 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 unlicensed event contract exchange. The settlement's principal provisions encompassed:
- $1.4M financial penalty assessed by the agency
- Commitment to discontinue non-compliant contract offerings
- Implementation of geographic restrictions preventing US-based traders from accessing the platform directly
Following this resolution, Polymarket has concentrated efforts on markets outside the United States whilst investigating potential compliance pathways for US operations.
Kalshi vs. CFTC (2023-2024)
Kalshi, operating as a CFTC-registered DCM, initiated litigation against the CFTC when the regulator declined approval for its congressional control contracts. This significant legal decision determined that the CFTC lacks authority to impose categorical prohibitions on event contracts merely because they reference political contests — representing a substantial victory for market participants. The DC Circuit Court's decision expanded possibilities for offering diverse event contract types.
Nadex and Other Platforms
Nadex (North American Derivatives Exchange) has furnished CFTC-supervised binary options trading for an extended period, encompassing certain event-based contracts. This operator's approach illustrates that lawful prediction market operations remain achievable within the existing regulatory framework.
What Makes a Prediction Market Legal in the US?
Platforms wishing to furnish prediction market contracts lawfully to American customers must satisfy these requirements:
- Secure DCM registration through the CFTC
- Satisfy Core Principles — encompassing 23 operational standards addressing market surveillance, financial safeguards, and trader safeguards
- Secure contract authorisation — each distinct event contract category requires submission and non-objection from the CFTC
- Deploy KYC/AML systems — establishing customer identity verification and financial crime prevention measures
The "Gaming" Exception
The Commodity Exchange Act (CEA) restricts event contracts touching upon "gaming" — language that the CFTC construes expansively. Consequently, sports-related prediction markets continue generating regulatory tension. Historically, the CFTC has maintained that sports event contracts constitute gaming activity, though Kalshi's judicial success has complicated this interpretation.
What Happens if You Trade on Unregistered Platforms?
Individual market participants encounter limited direct enforcement exposure — the CFTC concentrates enforcement on platforms rather than individual traders. Nevertheless, participation on unregistered venues introduces substantial risks:
- CFTC protections governing customer assets do not extend to your holdings
- Your deposits lack segregation requirements safeguarding them from platform liabilities
- CFTC remedies remain unavailable should the venue collapse or engage in misconduct
For comprehensive information regarding international regulatory frameworks, consult our 2026 global regulation guide. Prepared to engage with a properly regulated venue? Explore PolyGram's operational mechanics. Start trading on PolyGram →