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 within the United States — or thinking about doing so — grasping what the CFTC's oversight of prediction markets entails is absolutely essential. This regulatory body sets the rules around which contracts are tradeable, which venues permit them, and what compliance measures apply.
What is the CFTC?
The Commodity Futures Trading Commission serves as America's primary federal watchdog for commodity futures, options, and swaps. Given that prediction market contracts operate much like binary options, they come under CFTC authority whenever they are made available to American participants.
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 principal components were:
- $1.4M financial penalty imposed by the regulator
- Commitment to discontinue markets that did not meet regulatory standards
- Restriction of US-based traders from accessing the platform directly
Following this resolution, Polymarket has concentrated efforts on international expansion while investigating potential routes toward bringing services back to American consumers.
Kalshi vs. CFTC (2023-2024)
Kalshi, operating as a CFTC-registered DCM, challenged the agency's decision to reject its political contracts. This pivotal court battle demonstrated that the CFTC lacks authority to impose a blanket prohibition on event contracts merely because elections are involved — a significant victory for the sector. The DC Circuit Court's decision unlocked opportunities for expanded event contract markets.
Nadex and Other Platforms
Nadex (North American Derivatives Exchange) has delivered CFTC-regulated binary options for an extended period, including certain event-based offerings. This operational model shows that lawful prediction markets can exist 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 Americans, it must satisfy these requirements:
- Secure DCM status through formal CFTC registration
- Meet Core Principles — a set of 23 mandates addressing surveillance systems, financial safeguards, and trader protections
- Win contract approval — every distinct event contract category requires submission and CFTC non-objection
- Deploy KYC/AML controls — identity verification and financial crime prevention measures
The "Gaming" Exception
Under the Commodity Exchange Act (CEA), event contracts tied to "gaming" are forbidden — a definition the CFTC applies expansively. This explains why prediction markets centred on sports remain contentious. Historically, the CFTC has taken the stance that sports-linked event contracts fall into the gaming category, though Kalshi's courtroom success has muddied these boundaries.
What Happens if You Trade on Unregistered Platforms?
Individual traders generally encounter minimal direct consequences — the CFTC pursues platforms rather than individual customers. Nevertheless, using unregistered venues carries these drawbacks:
- CFTC safeguards for traders do not extend to your capital
- Your deposits lack the protection of segregated account rules
- The CFTC cannot intervene if the platform collapses or engages in misconduct
For a comprehensive overview of worldwide frameworks, consult our 2026 global regulation guide. Interested in trading through a properly regulated venue? Discover PolyGram's features. Start trading on PolyGram →