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 from within the United States — or thinking about starting — grasping the CFTC's regulatory authority over prediction markets is absolutely essential. This regulator dictates which contracts remain tradeable, on what venues, and subject to which rules.
What is the CFTC?
The Commodity Futures Trading Commission serves as the primary federal regulator overseeing commodity futures, options, and swaps throughout the United States. Given that prediction market contracts operate much like binary options, they come under CFTC supervision whenever they are made available to Americans.
Key CFTC Enforcement Actions
Polymarket (January 2022)
Polymarket reached a settlement with the CFTC for $1.4 million due to running an unregistered event contract marketplace. The settlement's main 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 concentrated efforts on markets outside the US whilst investigating possible avenues toward regulatory compliance domestically.
Kalshi vs. CFTC (2023-2024)
Kalshi, operating as a CFTC-registered DCM, brought legal action against the CFTC after the regulator declined its congressional control contracts. This pivotal ruling determined that the CFTC lacks authority to impose blanket restrictions on event contracts merely because they relate to electoral outcomes — a significant breakthrough for the sector. The DC Circuit Court decision paved the way for expanded event contract availability.
Nadex and Other Platforms
Nadex (North American Derivatives Exchange) has provided CFTC-regulated binary options for an extended period, encompassing certain event-based contracts. This operational framework shows that compliant prediction markets can function within the current regulatory structure.
What Makes a Prediction Market Legal in the US?
For a platform to lawfully provide prediction market contracts to American customers, it needs to:
- Register as a DCM with the CFTC
- Comply with Core Principles — 23 standards addressing market oversight, financial soundness, and participant safeguards
- Obtain contract approval — each distinct event contract must be filed and receive no objection from the CFTC
- Implement KYC/AML — know-your-customer and anti-money-laundering safeguards
The "Gaming" Exception
Under the Commodity Exchange Act (CEA), event contracts tied to "gaming" are forbidden — a definition the CFTC applies expansively. Consequently, sports-based prediction markets remain contentious. Historically, the CFTC has contended that sports event contracts qualify as gaming, though Kalshi's courtroom success has muddied these boundaries.
What Happens if You Trade on Unregistered Platforms?
Individual traders typically encounter minimal direct consequences — the CFTC pursues platforms rather than individual participants. Nevertheless, using 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 comprehensive information on worldwide regulatory frameworks, consult our 2026 global regulation guide. Prepared to engage with a properly regulated venue? Discover how PolyGram operates. Start trading on PolyGram →