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 exploring the possibility — grasping the CFTC's role in prediction markets is absolutely essential. This regulatory body establishes which contracts remain lawful to trade, which venues permit such activity, and what safeguards 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, the CFTC asserts regulatory authority over them when made available to American participants.
Key CFTC Enforcement Actions
Polymarket (January 2022)
Polymarket reached a settlement with the CFTC for $1.4 million following operation of an unregistered 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 this settlement, Polymarket has concentrated efforts on international expansion whilst investigating potential pathways toward US regulatory compliance.
Kalshi vs. CFTC (2023-2024)
Kalshi, operating as a CFTC-registered DCM, initiated legal proceedings against the CFTC when the agency declined approval for its congressional control contracts. This pivotal ruling determined that the CFTC cannot impose blanket prohibitions on event contracts merely because they concern electoral matters — a significant achievement for market participants. The DC Circuit Court's decision broadened opportunities 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-based contracts. This operational structure proves that compliant prediction markets remain achievable within the existing American regulatory framework.
What Makes a Prediction Market Legal in the US?
For a prediction market platform to lawfully provide 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" — a concept the CFTC interprets expansively. Consequently, sports-related prediction markets remain contentious. Historically, the CFTC has contended that sports event contracts qualify as gaming, though Kalshi's recent judicial success has complicated this interpretation.
What Happens if You Trade on Unregistered Platforms?
Individual traders encounter minimal direct liability — the CFTC pursues enforcement against platforms rather than consumers. Nevertheless, utilising unregistered platforms carries significant consequences:
- 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 international regulatory frameworks, consult our 2026 global regulation guide. Prepared to participate on a venue featuring robust safeguards? Discover PolyGram's functionality. Start trading on PolyGram →