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 exploring this possibility — grasping the CFTC's regulatory authority over prediction markets is essential. This body establishes which contracts remain lawful to trade, which venues may offer them, and what compliance obligations apply.
What is the CFTC?
The Commodity Futures Trading Commission serves as the principal federal regulator overseeing commodity futures, options, and swaps. Because prediction market contracts operate much like binary options, they come within CFTC purview whenever they are made available to individuals residing in the United States.
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 were:
- $1.4M civil monetary penalty
- Agreement to wind down non-compliant markets
- Geo-blocking US users from direct platform access
Following the settlement, Polymarket has redirected efforts toward markets outside the US whilst investigating potential compliance pathways domestically.
Kalshi vs. CFTC (2023-2024)
Kalshi, holding CFTC registration as a DCM, initiated legal proceedings against the CFTC after the regulator declined to approve its contracts linked to congressional activity. This pivotal ruling determined that the CFTC lacks authority to impose categorical restrictions on event contracts merely because they relate to electoral processes — a significant advancement for the sector. The DC Circuit's decision created opportunities for expanded event contract availability.
Nadex and Other Platforms
Nadex (North American Derivatives Exchange) has provided CFTC-supervised binary options for an extended period, encompassing certain event-linked contracts. This operational framework illustrates that compliant prediction markets remain achievable within the existing American regulatory framework.
What Makes a Prediction Market Legal in the US?
To lawfully provide prediction market contracts to American persons, an operator must:
- Register as a DCM with the CFTC
- Comply with Core Principles — 23 mandates addressing market monitoring, financial soundness, and investor safeguards
- Obtain contract approval — each proposed event contract category requires submission and non-objection from the CFTC
- Implement KYC/AML — know-your-customer and anti-money-laundering verification procedures
The "Gaming" Exception
The Commodity Exchange Act (CEA) restricts event contracts tied to "gaming" — terminology the CFTC construes expansively. Consequently, sports-based prediction markets remain legally contentious. Historically, the CFTC has maintained that sports event contracts qualify as gaming, though Kalshi's judicial success has created ambiguity on this question.
What Happens if You Trade on Unregistered Platforms?
Individual traders encounter limited direct liability — the CFTC pursues platforms rather than participants. Nevertheless, participation on unregistered venues entails:
- 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 →