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 participate in prediction markets from within the United States — or are you exploring this possibility — grasping the CFTC's role in prediction markets is essential. This regulatory body dictates which contracts you may lawfully participate in, which venues permit such activity, and what compliance measures apply.
What is the CFTC?
The Commodity Futures Trading Commission serves as the principal US federal authority overseeing commodity futures, options, and swaps trading. Because prediction market contracts operate much like binary options, they come under CFTC oversight whenever made available to US-based participants.
Key CFTC Enforcement Actions
Polymarket (January 2022)
Polymarket reached a settlement with the CFTC for $1.4 million following operation of an unregistered event contract marketplace. The settlement's principal components comprised:
- $1.4M financial penalty imposed by the regulator
- Commitment to discontinue non-compliant contract offerings
- Restriction of US participant access through geographical filtering
Following this resolution, Polymarket has concentrated efforts on international expansion whilst investigating potential routes toward US regulatory alignment.
Kalshi vs. CFTC (2023-2024)
Kalshi, holding CFTC-registered DCM status, initiated legal proceedings against the CFTC when the regulator declined approval for its legislative prediction contracts. This pivotal ruling determined that the CFTC lacks authority to impose categorical prohibitions on event contracts merely because they reference political processes — a significant achievement 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 delivered CFTC-regulated binary options for an extended period, encompassing certain event-based offerings. Their operational framework illustrates that compliant prediction market services remain achievable within the existing US regulatory framework.
What Makes a Prediction Market Legal in the US?
For a platform to lawfully furnish prediction market contracts to US-domiciled participants, it must satisfy these requirements:
- Obtain DCM registration through the CFTC
- Meet Core Principles — 23 standards encompassing trade monitoring, fiscal safeguards, and participant protections
- Secure contract authorisation — all proposed event contract categories require CFTC submission and non-objection
- Establish KYC/AML frameworks — participant verification and financial crime prevention mechanisms
The "Gaming" Exception
The Commodity Exchange Act (CEA) restricts event contracts involving "gaming" — terminology the CFTC construes expansively. Consequently, sports-focused prediction markets remain contentious. Historically, the CFTC has maintained that sports event contracts qualify as gaming, though Kalshi's judicial success has created ambiguity around this classification.
What Happens if You Trade on Unregistered Platforms?
End-users encounter relatively modest direct consequences — the CFTC pursues platforms rather than individual traders. Nevertheless, participation on unregistered venues entails:
- Absence of CFTC-mandated safeguards for your capital
- Lack of segregated holding requirements for your deposits
- No CFTC remedies available should the platform become insolvent or engage in misconduct
For comprehensive information on international regulatory frameworks, consult our 2026 global regulation guide. Interested in trading through a properly regulated venue? Discover PolyGram's platform features. Start trading on PolyGram →