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 be active in prediction markets from within the United States — or contemplating entry into this space — grasping the CFTC's regulatory authority over prediction markets is essential. This body sets the boundaries on what instruments you may legally access, which venues offer them, and the operational framework governing your participation.
What is the CFTC?
The Commodity Futures Trading Commission serves as the primary federal regulator overseeing commodity derivatives, options contracts, and swap agreements across US markets. Given that prediction market instruments operate with structural parallels to binary options, they come within CFTC purview whenever 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 unlicensed event contract exchange. The settlement's principal provisions encompassed:
- $1.4M civil monetary penalty
- Agreement to wind down non-compliant markets
- Geo-blocking US users from direct platform access
Following this resolution, Polymarket has redirected efforts toward international expansion whilst investigating potential routes toward US regulatory alignment.
Kalshi vs. CFTC (2023-2024)
Kalshi, operating as a CFTC-registered DCM, initiated litigation against the CFTC after the regulator declined its congressional control contracts. This pivotal ruling determined that the CFTC cannot impose categorical prohibitions on event contracts merely on account of their electoral dimension — a significant development for market participants. The DC Circuit Court decision unlocked possibilities for expanded event contract availability.
Nadex and Other Platforms
Nadex (North American Derivatives Exchange) has long furnished CFTC-supervised binary options, encompassing select event-driven instruments. Their operational framework illustrates that regulated prediction markets remain achievable within the current US statutory regime.
What Makes a Prediction Market Legal in the US?
For a platform to lawfully provide prediction market instruments to American participants, it must:
- 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" — a concept the CFTC interprets expansively. This restriction explains the contentious status of sports-based prediction markets. Historically, the CFTC has categorised sports event contracts within the gaming prohibition, though Kalshi's judicial success has complicated this interpretation.
What Happens if You Trade on Unregistered Platforms?
Retail participants encounter limited direct enforcement exposure — the CFTC pursues platforms rather than individual traders. 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 comprehensive international regulatory context, consult our 2026 global regulation guide. Prepared to engage with a properly supervised venue? Discover PolyGram's platform features. Start trading on PolyGram →