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 exploring the possibility — 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 activity, and what compliance measures apply.
What is the CFTC?
The Commodity Futures Trading Commission serves as the primary federal regulator overseeing commodity futures, options, and swaps in the United States. Because prediction market contracts operate much like binary options, the CFTC claims regulatory authority whenever such instruments 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 of an unlicensed event contract marketplace. 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 settlement, Polymarket has concentrated efforts on overseas jurisdictions whilst investigating potential routes toward US-based compliance.
Kalshi vs. CFTC (2023-2024)
Kalshi, operating as a CFTC-registered DCM, initiated litigation against the CFTC after the regulator declined approval for its congressional control contracts. This pivotal ruling determined that the CFTC lacks authority to impose a blanket prohibition on event contracts merely because they reference electoral outcomes — a significant achievement for the sector. The DC Circuit Court's decision expanded possibilities for more diverse event contract products.
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 compliant prediction markets remain achievable within the current American 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 involving "gaming" — language the CFTC construes expansively. Consequently, sports-related prediction markets remain contentious. The CFTC has customarily maintained that sports event contracts constitute 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 participants. Nevertheless, using unregistered platforms carries significant drawbacks:
- 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 →