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 getting started — grasping the CFTC's role in prediction markets is absolutely essential. This regulatory body governs which contracts are tradeable, which venues offer them legitimately, and what rules apply.
What is the CFTC?
The Commodity Futures Trading Commission serves as the principal US regulatory authority overseeing commodity futures, options, and derivatives transactions. Prediction market contracts operate much like binary options, placing them squarely within CFTC oversight when 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 unlicensed event contract exchange. The settlement's principal components were:
- $1.4M financial penalty imposed by the agency
- Commitment to discontinue non-compliant contract offerings
- Restriction of platform access for users in the United States
Following this resolution, Polymarket has redirected efforts toward international expansion whilst investigating potential compliance pathways for US operations.
Kalshi vs. CFTC (2023-2024)
Kalshi, operating as a CFTC-registered DCM, initiated legal proceedings against the CFTC after the agency declined approval for its legislative outcome contracts. This pivotal ruling determined that the CFTC lacks authority to impose categorical prohibitions on event contracts merely because they reference electoral processes — a significant achievement for market participants. The DC Circuit's decision expanded opportunities for additional event contract categories.
Nadex and Other Platforms
Nadex (North American Derivatives Exchange) has provided CFTC-regulated binary options for an extended period, encompassing certain event-based offerings. This operational framework illustrates that lawful prediction markets can function within the existing regulatory framework.
What Makes a Prediction Market Legal in the US?
Operating prediction market contracts lawfully for American traders requires a platform to:
- Obtain DCM registration from the CFTC
- Meet Core Principles — 23 mandates addressing market monitoring, financial safeguards, and trader protections
- Secure contract authorisation — each proposed event contract category requires submission and CFTC non-objection
- Deploy KYC/AML systems — customer identification and financial crime prevention measures
The "Gaming" Exception
Under the Commodity Exchange Act (CEA), event contracts tied to "gaming" activities are forbidden — a definition the CFTC interprets expansively. This restriction creates ongoing uncertainty around sports-related prediction markets. Historically, the CFTC has characterised sports event contracts as gaming activities, though Kalshi's judicial success has muddied this classification.
What Happens if You Trade on Unregistered Platforms?
Retail participants encounter minimal direct enforcement — the CFTC pursues platforms rather than individual traders. Nevertheless, using unregistered venues entails:
- Absence of CFTC safeguards for your capital
- Lack of mandatory account segregation for your money
- No CFTC remedies if the venue collapses or engages in misconduct
For comprehensive information on worldwide 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 →