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 thinking about starting — grasping the CFTC's role in prediction markets is absolutely essential. This regulatory body dictates which contracts remain lawful to trade, which venues permit such trading, and what compliance measures apply.
What is the CFTC?
The Commodity Futures Trading Commission serves as America's principal federal watchdog over commodity futures, options, and swaps. Because prediction market contracts behave much like binary options contracts, the CFTC asserts authority whenever they are offered to American participants.
Key CFTC Enforcement Actions
Polymarket (January 2022)
Polymarket reached a settlement with the CFTC for $1.4 million following its operation as an unregistered event contract marketplace. The settlement's primary components were:
- $1.4M civil monetary penalty
- Agreement to wind down non-compliant markets
- Geo-blocking US users from direct platform access
Following this settlement, Polymarket has concentrated on markets outside the United States whilst investigating potential compliance routes for American operations.
Kalshi vs. CFTC (2023-2024)
Kalshi, operating as a CFTC-registered DCM, initiated litigation against the CFTC when the regulator declined to authorise its congressional control contracts. This pivotal ruling determined that the CFTC lacked authority to impose a blanket prohibition on event contracts merely because they relate to electoral matters — 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 provided CFTC-regulated binary options for an extended period, encompassing certain event-linked contracts. Their operational structure illustrates that compliant prediction markets remain achievable within America's existing regulatory framework.
What Makes a Prediction Market Legal in the US?
For a platform to lawfully provide prediction market contracts 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 that involve "gaming" — language that the CFTC interprets expansively. Consequently, sports-based prediction markets remain legally uncertain. The CFTC has traditionally maintained that sports event contracts qualify as gaming, although Kalshi's judicial success has muddied this distinction.
What Happens if You Trade on Unregistered Platforms?
Individual traders encounter minimal direct legal exposure — the CFTC pursues platforms rather than individual customers. Nevertheless, using unregistered platforms carries significant risks:
- 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 →