Guide

Are Prediction Markets Legal in the United States?

The short answer is that the main US prediction markets operate legally under federal oversight, but the rules are unsettled and keep changing. Platforms like Kalshi and Polymarket list "event contracts" that are regulated by the Commodity Futures Trading Commission (CFTC), the same agency that oversees commodity-futures markets, rather than by state gambling regulators. That federal status is the heart of an active legal fight: several states argue some of these contracts, especially on sports, are gambling that requires a state license, while the CFTC argues federal law preempts them. This page explains who regulates prediction markets, how Kalshi and Polymarket each got to their current standing, what the sports dispute is about, how all of this differs from state-regulated sports betting, and why the picture is still moving. None of this is legal or financial advice.

Who regulates prediction markets: the CFTC

In the United States, the prediction markets people actually use are regulated as financial markets, not as casinos. The relevant law is the Commodity Exchange Act (CEA), and the relevant regulator is the Commodity Futures Trading Commission (CFTC), an independent federal agency. The products are "event contracts" — binary yes/no contracts that pay out based on whether a defined event happens — and they trade on exchanges the CFTC has approved as designated contract markets (DCMs).

A DCM is a federally licensed, self-regulating exchange that must follow CFTC rules on market integrity, reporting, position limits, and customer protection. This is the same category of license held by long-established futures venues. By April 2026, several CFTC-regulated DCMs had collectively self-certified thousands of event contracts, according to a Norton Rose Fulbright analysis. "Self-certify" matters here: under the CEA, an exchange can typically list a new contract by certifying to the CFTC that it complies with the rules, rather than waiting for case-by-case approval. The CFTC can review and, if it objects, move to block a contract.

The practical effect is that a market is generally legal at the federal level if it runs on a CFTC-regulated exchange and lists contracts that comply with the CEA. The unsettled questions are which contracts qualify, and whether states can still apply their own gambling laws on top. Those are the open fights described below.

Kalshi: the CFTC-regulated path

Kalshi is the clearest example of the regulated route. Its operating entity, KalshiEX LLC, received CFTC designation as a contract market in November 2020 and launched publicly in 2021, making it an exchange built inside the federal framework from the start rather than offshore.

Its standing has been tested in court. Kalshi sought to list contracts on which party would control Congress, and the CFTC tried to block them as prohibited "gaming" or election contracts. In September 2024 a federal district court ruled in Kalshi's favor, reasoning that elections are not games and that the underlying events were not themselves unlawful, so the contracts did not fall under the CEA's prohibited categories. The CFTC sought a stay; the US Court of Appeals for the D.C. Circuit declined to halt the contracts in October 2024, letting them go live, and in 2025 the CFTC dropped its appeal, ending that particular challenge.

The harder fight moved to sports and to the states. After Kalshi self-certified sports event contracts in January 2025, several state gambling regulators sent it cease-and-desist orders in the following months, arguing the contracts were unlicensed sports wagering. Kalshi sued. In a notable win, the Third Circuit Court of Appeals in April 2026 upheld an injunction barring New Jersey from enforcing its gambling laws against Kalshi's sports contracts, on the theory that the CEA preempts state interference with CFTC-regulated markets. Other state cases remain open, so Kalshi's federal license is settled while its state-by-state position is not.

Polymarket: a settlement, a wind-down, and a regulated return

Polymarket took the opposite route and had to course-correct. It launched in 2020 as a crypto-based platform settling trades in the USDC stablecoin, and it operated without a US license. In January 2022 the CFTC settled with the company over running an unregistered event-contract facility, imposing a $1.4 million penalty and a cease-and-desist order. As part of that resolution, Polymarket wound down noncompliant contracts and blocked US customers, and it stayed closed to US users for several years.

The path back ran through a license rather than a workaround. In 2025 Polymarket acquired QCEX — a CFTC-licensed derivatives exchange (QCX, LLC) and an associated clearinghouse — in a deal reported at about $112 million, giving it federally regulated infrastructure to operate domestically. After the CFTC cleared the exchange, Polymarket received an amended order of designation in late November 2025, allowing it to bring US users back through that regulated entity. Reporting indicates US access reopened around December 2025, initially as a controlled rollout rather than an instant full launch.

So Polymarket's US legality today rests on operating through its CFTC-licensed exchange, not on its earlier offshore model. As with any platform, eligibility and the exact rollout can change, and the company's own site is the authoritative source for who can currently use it.

The sports event-contract fight: CFTC versus the states

The sharpest unresolved question is sports. Prediction-market exchanges argue that a contract on who wins a game is an event contract under the CEA, and therefore federally regulated and shielded from state gambling law. Many state regulators disagree, framing the same product as sports betting that requires a state sportsbook license. Because both sides have plausible legal arguments, this is being fought jurisdiction by jurisdiction.

The disputes are concrete. Beyond New Jersey, multiple states moved against the exchanges in 2026: per a Norton Rose Fulbright account, the CFTC and Department of Justice filed suits in April 2026 contesting enforcement actions by Illinois, Connecticut, and Arizona; Arizona had separately filed criminal charges against KalshiEX in March 2026. Results have diverged — the Third Circuit sided with federal preemption in the New Jersey matter, while other cases remain pending — which is exactly the kind of split that legal commentators, including a Stanford Law analysis, expect could ultimately reach the Supreme Court.

The CFTC is also writing rules instead of relying only on litigation. On June 10, 2026 it issued a proposed framework for event contracts, open for public comment (with a deadline reported as July 27, 2026). As described in coverage from outlets including ESPN and CNN, the proposal would let most sports contracts stand as contributing to price discovery, while moving to bar contracts seen as manipulable or against the public interest — such as those on player injuries, officiating calls, in-game altercations, youth sports, and pitch-by-pitch outcomes. Because it is a proposal under comment, the details can change before anything is final.

How this differs from state-regulated sports betting

It helps to separate two distinct legal worlds that are now colliding. Traditional sports betting in the US is regulated state by state. After the Supreme Court struck down the federal ban (PASPA) in its 2018 Murphy v. NCAA decision, individual states became free to legalize and license sportsbooks, and a large share of states have since done so, each with its own regulator, taxes, and rules. In that model, a licensed sportsbook is the "house": it sets the odds and takes the other side of your wager.

Prediction markets are structured to look like exchanges, not sportsbooks. There is no house setting a line; traders buy and sell yes/no contracts with each other, and the price emerges from supply and demand the way it does on a futures exchange. That is the basis for claiming federal CFTC jurisdiction under the CEA rather than state gambling law. State regulators counter that, whatever the structure, betting on a game's outcome is functionally sports wagering and should sit under their licensing regimes.

The practical upshot for a reader is that legality depends on which framework applies, and that is precisely what courts and the CFTC are deciding. A CFTC-regulated event contract may be available nationwide under federal law even where the same outcome would otherwise require a state sportsbook license, but that federal-preemption position is being actively contested. None of this is legal advice; anyone weighing participation should confirm the current status for their own state on the platform itself, and treat market prices as crowd-implied probabilities that can be wrong, not as a recommendation to trade.