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 in prediction market trading from within the United States — or are you evaluating whether to do so — grasping the CFTC's role in prediction markets is essential. This regulatory body dictates which contracts you may lawfully participate in, which venues permit such trading, and what compliance obligations apply.
What is the CFTC?
The Commodity Futures Trading Commission serves as the principal US federal regulator overseeing commodity futures, options, and swaps. Given that prediction market contracts operate much like binary options instruments, they fall within CFTC oversight whenever 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 upon operating an unlicensed 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 its 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 litigation against the CFTC when the regulator declined approval for its political contracts. This pivotal ruling determined that the CFTC lacks authority to categorically prohibit event contracts merely because they reference electoral processes — a significant achievement for market participants. The DC Circuit's decision paved the way for expanded event contract availability.
Nadex and Other Platforms
Nadex (North American Derivatives Exchange) has furnished CFTC-regulated binary options for an extended period, encompassing certain event-linked instruments. This operational framework illustrates that regulatory status compliance remains achievable within the current US statutory framework.
What Makes a Prediction Market Legal in the US?
To lawfully offer prediction market contracts to US-based individuals, an operator 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 involving "gaming" — language that the CFTC construes expansively. Consequently, sports-linked prediction markets remain contentious. Historically, the CFTC has maintained that sports event contracts qualify as gaming, though Kalshi's judicial victory has muddied these distinctions.
What Happens if You Trade on Unregistered Platforms?
Retail traders encounter minimal direct enforcement exposure — the CFTC pursues platforms rather than individual participants. Nevertheless, utilising unregistered venues carries substantial 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 →