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 trading prediction markets within the United States — or thinking about entering this space — grasping the CFTC's role in prediction markets is absolutely essential. This regulatory body dictates which contracts are permissible, which venues can offer them, and what operational standards apply.
What is the CFTC?
The Commodity Futures Trading Commission serves as the primary US federal regulator overseeing commodity futures, options, and swaps. Given that prediction market contracts operate much like binary options, they come under CFTC oversight 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 operation of an improperly registered event contract marketplace. The agreement's principal components comprised:
- $1.4M financial penalty imposed by the regulator
- Commitment to terminate non-compliant contract offerings
- Restriction preventing American users from accessing the platform directly
Following this resolution, Polymarket has redirected efforts toward international expansion whilst investigating potential routes toward US regulatory approval.
Kalshi vs. CFTC (2023-2024)
Kalshi, operating as a CFTC-registered DCM, initiated legal proceedings against the CFTC after rejection of its proposed congressional election contracts. This pivotal ruling determined that the CFTC lacks authority to impose categorical restrictions on event contracts merely because electoral participation is involved — representing a significant achievement for market participants. The DC Circuit's decision broadened possibilities for expanded event contract markets.
Nadex and Other Platforms
Nadex (North American Derivatives Exchange) has furnished CFTC-compliant binary options for an extended period, encompassing certain event-based offerings. Their operational structure illustrates that lawful prediction markets remain achievable within the existing American regulatory framework.
What Makes a Prediction Market Legal in the US?
Operating prediction market contracts lawfully for American participants requires that a venue:
- Obtain DCM registration through the CFTC
- Meet Core Principles requirements — encompassing 23 standards addressing surveillance systems, financial safeguards, and trader protections
- Secure contract authorisation — submitting each proposed contract category for CFTC review and obtaining non-objection
- Establish KYC/AML procedures — deploying identity verification and financial crime prevention measures
The "Gaming" Exception
Under the Commodity Exchange Act (CEA), event contracts classified as "gaming" are prohibited — a definition the CFTC construes expansively. Consequently, sports-based prediction markets remain contentious territory. Historically, the CFTC has maintained that sports event contracts qualify as gaming, though Kalshi's recent judicial success has complicated this interpretation.
What Happens if You Trade on Unregistered Platforms?
Individual market participants encounter relatively modest direct consequences — the CFTC pursues venues rather than individual traders. Nevertheless, participation on unregistered venues entails:
- Absence of CFTC safeguards governing your capital
- Lack of mandatory account segregation protections for your money
- Inability to seek CFTC assistance should the venue collapse or behave dishonestly
For comprehensive information on international regulatory frameworks, consult our 2026 global regulation guide. Prepared to participate on a properly regulated venue? Discover PolyGram's platform features. Start trading on PolyGram →