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 engaged in prediction market trading from within the United States — or contemplating entry into this space — grasping the CFTC's role in prediction markets is essential. This regulatory body dictates which contracts remain tradeable, which venues permit such activity, and the operational requirements platforms must satisfy.
What is the CFTC?
The Commodity Futures Trading Commission serves as the primary federal regulator overseeing commodity futures, options, and swap arrangements across US markets. Given that prediction market contracts operate with structural similarities to binary options, they come within CFTC oversight whenever marketed 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 unregistered event contract venue. The settlement's principal components 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 redirected efforts toward international expansion whilst investigating potential pathways toward US regulatory compliance.
Kalshi vs. CFTC (2023-2024)
Kalshi, operating as a CFTC-registered DCM, initiated litigation against the CFTC after the regulator declined its congressional control contracts. This significant ruling determined that the CFTC lacks authority to impose blanket prohibitions on event contracts merely because they reference electoral outcomes — a substantial victory for market participants. The DC Circuit's decision broadened possibilities for expanded event contract availability.
Nadex and Other Platforms
Nadex (North American Derivatives Exchange) has maintained CFTC-regulated binary options offerings for an extended period, encompassing certain event-based arrangements. Their operational framework illustrates that compliant prediction markets remain achievable within the current US regulatory structure.
What Makes a Prediction Market Legal in the US?
Operating prediction market contracts lawfully for American participants demands that a venue:
- 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" — terminology the CFTC interprets expansively. Consequently, sports-oriented prediction markets continue facing regulatory scrutiny. Historically, the CFTC has asserted that sports event contracts qualify as gaming, though Kalshi's judicial success has muddied this distinction.
What Happens if You Trade on Unregistered Platforms?
Individual market participants encounter limited direct enforcement exposure — the CFTC concentrates enforcement on venues rather than end-users. Nevertheless, participation on unregistered venues carries significant implications:
- 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 insight into international regulatory frameworks, consult our 2026 global regulation guide. Prepared to engage with a properly regulated venue? Explore PolyGram's functionality. Start trading on PolyGram →