Are prediction markets legal? In the US, the short answer is yes, with significant caveats that depend on which platform you use and which state you live in.
At the federal level, prediction markets operating on CFTC-regulated exchanges are legal. The Commodity Futures Trading Commission classifies event contracts as commodity derivatives under the Commodity Exchange Act, and in February 2026, the agency filed a federal court brief asserting its exclusive jurisdiction over these markets. 1CFTC, “CFTC Reaffirms Exclusive Jurisdiction over Prediction Markets,” cftc.gov, February 17, 2026
Platforms like Kalshi hold full CFTC designation. Polymarket acquired a CFTC-regulated exchange in 2025 to gain the same status.
But states see it differently. As of late March 2026, nearly 50 active lawsuits span 14 or more states. Arizona filed the first-ever criminal charges against a prediction market platform. Federal courts are split on who is right.
Internationally, the picture is even more complex: most countries classify prediction markets as gambling, and enforcement is escalating.
This guide breaks down prediction market legality across three layers: US federal law, state-level regulation, and international rules.
Are Prediction Markets Legal in the United States?
Under US federal law, prediction markets are legal when they operate on exchanges regulated by the Commodity Futures Trading Commission. The CFTC classifies event contracts as commodity derivatives under the Commodity Exchange Act (CEA), placing them alongside futures and options.
The CFTC first recognized event contracts in 1992 when it issued a no-action letter allowing the Iowa Electronic Markets to operate at the University of Iowa. The modern regulatory era began in November 2020, when KalshiEX LLC received an Order of Designation as a Designated Contract Market (DCM), making it the first exchange built exclusively for event contracts. 2CFTC, “Order of Designation: KalshiEX LLC,” cftc.gov, November 2020
In July 2025, Polymarket acquired QCX LLC, an existing DCM, for $112 million, and the CFTC issued an Amended Order of Designation in November 2025. 3The Block, “Polymarket Acquires QCX for $112M,” theblock.co, July 2025
In February 2026, the CFTC filed an amicus brief in the Ninth Circuit Court of Appeals stating that it holds “exclusive jurisdiction” over event contracts. CFTC Chair Michael Selig put it directly: these products are commodity derivatives, and the CFTC will defend its regulatory authority over them.
The Trump administration’s CFTC has taken a strongly pro-prediction-market posture. In January 2026, Chairman Selig withdrew the Biden-era proposed rule that would have banned political and sports event contracts. 4CNBC, “CFTC Scraps Proposed Ban on Sports Contracts,” cnbc.com, January 29, 2026 In March 2026, the agency issued an Advance Notice of Proposed Rulemaking and a Division of Market Oversight advisory outlining how existing rules apply to prediction markets. 5CFTC, “ANPRM on Event Contracts,” 91 Fed. Reg. 12516, March 16, 2026
Not all prediction market platforms carry the same legal status. The platform type determines your level of federal regulatory protection:
| Platform Type | Example | Legal Basis | Protection Level |
|---|---|---|---|
CFTC Designated Contract Market (DCM) | Kalshi, Polymarket US | Full CFTC registration, CEA preemption | Highest: segregated funds, audited settlement, clearinghouse backing |
CFTC No-Action Letter | PredictIt | CFTC letter permitting operation with conditions | Moderate: investment caps, academic framework, no clearinghouse |
CFTC FCM/Intermediary | FanDuel Predicts (via CME Group) | Registered Futures Commission Merchant | High: operates through established DCM, CFTC and NFA oversight |
Crypto-Native / Unregulated | Global Polymarket, Opinion | None (or offshore only) | Lowest: no US regulatory oversight, no fund segregation, no recourse |
Expert Tip
The legal distinction between “CFTC-regulated” and “unregulated” is not a marketing label. CFTC-regulated DCMs must hold customer funds in segregated accounts, maintain audited settlement sources, and operate a clearinghouse. If the platform goes bankrupt, your funds are protected. On an unregulated crypto platform, none of those protections exist.
The federal legal foundation is real and strengthening. But federal regulation only answers half the question. The harder problem is what happens at the state level.
The State-by-State Problem: Where Courts and Regulators Disagree
While the CFTC claims exclusive federal jurisdiction, state regulators and attorneys general in more than a dozen states disagree. The core legal fight centers on one question: does the Commodity Exchange Act preempt state gambling laws for sports event contracts traded on federally regulated exchanges?
Federal courts have split on the answer. Some have sided with prediction market platforms, ruling that CFTC designation preempts state authority. Others have ruled that sports event contracts are gambling subject to state regulation, regardless of federal registration.
Courts favoring platforms (federal preemption):
Nevada: Federal district court granted Kalshi a preliminary injunction in 2025. State appealed to the Ninth Circuit. New Jersey: Federal district court granted preliminary injunction. NJ Division of Gaming appealed to Third Circuit. Tennessee: Federal court granted Kalshi a preliminary injunction on February 19, 2026, finding sports event contracts likely qualify as “swaps” under the CEA. 6Holland & Knight, “Prediction Markets at a Crossroads,” hklaw.com, February 2026
Courts favoring state regulators:
Maryland: Federal court denied Kalshi’s preliminary injunction, ruling state gaming authority applies. Massachusetts: Suffolk County Superior Court ruled in January 2026 that Kalshi’s sports contracts are subject to state gaming laws. The Supreme Judicial Court accepted the case for direct review. Ohio: Federal court denied Kalshi’s preliminary injunction on March 9, 2026, ruling sports event contracts are “gambling,” not “swaps.” 7NBC News, “Ohio Judge Rules Kalshi Sports Betting Must Adhere to State Law,” nbcnews.com, March 2026 Kalshi immediately appealed to the Sixth Circuit.
The enforcement is escalating beyond civil suits. On March 17, 2026, Arizona filed the first-ever criminal charges against a prediction market, bringing 20 misdemeanor counts against Kalshi for operating an illegal gambling business and accepting election wagers. 8NPR, “Arizona AG Files Criminal Charges Against Prediction Market Kalshi,” npr.org, March 17, 2026 CFTC Chairman Selig called the criminal prosecution “entirely inappropriate” and a “jurisdictional dispute.”
On March 20, 2026, a Nevada state court issued a temporary restraining order blocking Kalshi from offering sports, election, and entertainment contracts in the state. The Nevada Gaming Control Board declared it had “successfully restricted the operation of all unlicensed prediction markets” in Nevada, alongside earlier restrictions on Polymarket, Robinhood, Coinbase, and Crypto.com. 9Covers, “Kalshi Shuts Down Sports Trading in Nevada After Legal Loss,” covers.com, March 21, 2026 Washington state sued Kalshi on March 28, 2026. 10CoinDesk, “Washington Sues Kalshi,” coindesk.com, March 28, 2026
The American Gaming Association estimates states have lost over $600 million in tax revenue from wagers placed on prediction markets instead of licensed sportsbooks. 11MultiState, “Prediction Market Regulation Heats Up,” multistate.us, March 19, 2026 CFTC Chairman Selig cited “nearly 50 active cases” across the country in his February 2026 op-ed. At least 11 states have introduced prediction market legislation in 2026. Hawaii passed a bill through its House to classify prediction markets as gambling. Kentucky advanced a 17.25% tax on operator fees.
Warning
If you are in a state with active enforcement (particularly Arizona, Ohio, Maryland, Massachusetts, Nevada, Washington, Illinois, Michigan, Iowa, or Utah), understand that sports and election event contracts face serious legal challenges. Arizona has escalated to criminal charges. Non-sports contracts (economics, weather, crypto) generally face less state scrutiny.
The practical takeaway: your ability to trade depends not just on whether prediction markets are legal federally, but on which state you are in and which contract types you are trading.
How Your Platform Choice Affects Your Legal Exposure
The platform you choose directly determines your legal risk. Not all prediction markets operate under the same regulatory framework, and the differences matter when enforcement actions escalate or a platform faces financial trouble.
CFTC-Regulated DCMs (Kalshi, Polymarket US): These platforms hold full CFTC registration as Designated Contract Markets. Customer funds sit in segregated accounts. Trades clear through a regulated clearinghouse. If the platform goes bankrupt, your deposits are protected. The CEA’s preemption language gives these platforms the strongest legal argument against state enforcement. Kalshi has been the most aggressive in asserting federal preemption, filing lawsuits in multiple states.
CFTC FCM/Intermediary Model (FanDuel Predicts): FanDuel operates as a registered Futures Commission Merchant through CME Group’s DCM. This gives users CFTC and NFA oversight without FanDuel itself holding a DCM designation. FanDuel’s approach to state conflict has been different from Kalshi’s: it voluntarily pulls sports contracts from states with legal sports betting, avoiding direct regulatory confrontation. The result is that FanDuel Predicts is available in all 50 states, though sports contracts are limited to 18 states without licensed sportsbooks. 12SBC Americas, “FanDuel Predicts Available in All 50 States,” sbcamericas.com, January 2026
CFTC No-Action Letter (PredictIt): PredictIt operates under a CFTC no-action letter, not a full DCM registration. 13CFTC, “No-Action Letter 25-20,” cftc.gov, July 2025 The letter permits operation with conditions, including a $3,500 investment cap per contract. Because PredictIt offers only political markets (no sports contracts), it has avoided the state enforcement actions hitting Kalshi and Polymarket. It has lower volume and liquidity but also lower legal risk.
Crypto-Native/Unregulated (Global Polymarket, Opinion): If you are accessing Polymarket’s global platform (not the US-regulated version) or trading on platforms like Opinion, you are operating without US federal regulatory protection. No fund segregation, no clearinghouse, no CFTC recourse. International enforcement is increasing: Australia blocked Polymarket in 2025, 14Polymarket Platform Intelligence, verified March 18, 2026 the Netherlands ordered it to cease operations in January 2026, 15NL Times, “Dutch Regulators Block Access to US Betting Site,” nltimes.nl, February 20, 2026 and Argentina banned it nationwide in March 2026. 16Decrypt, “Buenos Aires Court Orders Polymarket Blocked in Argentina,” decrypt.co, March 2026
International Prediction Market Regulation: UK, EU, and Beyond
Outside the United States, prediction markets face a fundamentally different legal framework. Most countries classify them as gambling, not financial instruments, and the regulatory consequences are significant.
United Kingdom: The UK treats prediction markets as gambling. In a February 4, 2026 blog post, UKGC Director of Strategy Brad Enright stated that prediction markets would be classified as “betting intermediaries” under existing UK gambling law, requiring a UKGC license. 17UKGC, Brad Enright blog post, “Prediction Markets,” gamblingcommission.gov.uk, February 4, 2026 Neither Kalshi nor Polymarket holds a UKGC license, and both are unavailable in the UK. Matchbook became the first UK-licensed platform to launch a dedicated prediction markets product in January 2026 under its existing UKGC betting exchange license. Betfair Exchange also operates under UKGC licensing. The FCA separately regulates financial spread betting, but this does not extend to event contracts on politics, sports, or entertainment.
European Union: There is no unified EU framework for prediction markets. Individual member states apply their own gambling regulations. France’s National Gaming Authority (ANJ) investigated Polymarket and secured a geoblock in November 2024. The Netherlands’ Kansspelautoriteit (KSA) ordered Polymarket to cease operations in January 2026, imposing penalties of EUR 420,000 per week. Germany’s Joint Gambling Authority (GGL) has classified prediction markets as illegal gambling under the Interstate Treaty on Gambling 2021 and issued public warnings. 18Taylor Wessing, “Prediction Markets in Germany and Europe,” taylorwessing.com, March 26, 2026 Belgium, Italy, and Poland have all blacklisted major platforms. The EU’s Markets in Crypto-Assets Regulation (MiCA), entering full implementation in July 2026, may apply to crypto-based prediction markets, though event contracts more likely fall under national gambling laws.
Asia-Pacific: Australia’s ACMA determined Polymarket was an illegal gambling service in August 2025 and ordered ISP-level blocking. New Zealand’s Department of Internal Affairs ruled in February 2026 that prediction markets are prohibited under the Gambling Act 2003. Singapore’s Gambling Regulatory Authority mandated geoblocking of Polymarket in January 2025. Japan and South Korea remain accessible for most platforms but lack specific regulatory frameworks.
Latin America: Argentina ordered a nationwide block of Polymarket in March 2026 after suspicious trading on inflation data. Colombia blocked Polymarket in October 2025. Brazil and Mexico remain accessible but have no specific prediction market regulation.
India: India passed the Promotion and Regulation of Online Gaming Act 2025 (PROGA) in August 2025, imposing a blanket ban on all real-money online games including prediction markets. The domestic platform Probo shut down its real-money operations immediately. 19Storyboard18, “Breaking: Opinion Trading Platform Probo Shuts Operations in India,” storyboard18.com, August 2025 The Enforcement Directorate raided Probo offices and attached over 400 crore (approximately $47 million) in assets. Polymarket is also banned under PROGA. India’s 1.4 billion population represents the largest single-country market where prediction markets are now explicitly illegal.
Canada: Prediction markets are largely banned in Canada. The Canadian Securities Administrators’ 2017 ban on binary options applies to event contracts. Ontario’s Securities Commission fined Polymarket $200,000 in 2025 and banned it from the province. Kalshi lists Canada as a restricted jurisdiction. 20Casino.org, “Will Prediction Markets Ever Become Legal in Canada?” casino.org, February 11, 2026 However, in March 2026, Canada’s Investment Regulatory Organization (CIRO) approved Wealthsimple to offer limited event contracts on economic and financial topics. Sports and election contracts remain prohibited. 21Covers, “Wealthsimple to Offer Prediction Markets in Canada Without Sports,” covers.com, March 25, 2026
Pro Tip
If you are outside the US, check your country’s gambling regulator for current guidance before using any prediction market platform. The enforcement landscape is shifting rapidly, with new country-level actions happening monthly in 2026.
What’s Coming Next: Legislation, Court Rulings, and the CFTC’s 2026 Agenda
The legal status of prediction markets is not settled. Multiple simultaneous legal battles, legislative proposals, and regulatory initiatives will reshape this space over the next 12 to 24 months.
Federal courts will determine preemption.
The split between circuit courts is unsustainable. The Ninth Circuit is hearing consolidated Nevada arguments on April 16, 2026. The Fourth Circuit’s Maryland oral arguments are scheduled for May 7, 2026. The Sixth Circuit is hearing Kalshi’s appeal of the Ohio ruling. If these circuits reach opposite conclusions, the US Supreme Court will likely take the case to resolve the federal-state jurisdiction question.
The CFTC is writing new rules.
On March 16, 2026, the CFTC published an Advance Notice of Proposed Rulemaking (ANPRM) in the Federal Register soliciting public input on how event contracts should be regulated. 22CFTC, “ANPRM on Event Contracts,” 91 Fed. Reg. 12516, March 16, 2026 Four days earlier, the Division of Market Oversight issued Staff Advisory 26-08 outlining how DCM Core Principles apply to prediction markets, including contract design, surveillance, and insider trading prevention. 23Crowell & Moring, “CFTC Takes Additional Steps Toward Prediction Market Regulation,” crowell.com, March 2026
The CFTC is also working with the SEC on a joint interpretation to draw clearer lines between commodity swaps and security-based swaps for event contracts. The US Attorney for the Southern District of New York has publicly stated that insider trading enforcement actions targeting prediction markets are coming. 24Congressional Research Service, “Prediction Markets and Insider Trading Law,” congress.gov, March 2026
Congress is engaged, aggressively.
At least seven bills targeting prediction markets were introduced in Congress by late March 2026. The Prediction Markets Are Gambling Act (Senators Schiff and Curtis, bipartisan) would ban sports event contracts entirely. 25Sen. Schiff, Press Release, schiff.senate.gov, March 24, 2026 The DEATH BETS Act (Senator Schiff, Rep. Levin) would prohibit contracts involving war, terrorism, assassination, or death. 26CoinDesk, “Schiff Pushes Ban on Prediction Market Bets Tied to War and Death,” coindesk.com, March 11, 2026
The STOP Corrupt Bets Act (Senator Merkley, Rep. Raskin) would ban contracts on elections, sports, government actions, and military operations. The PREDICT Act (Rep. Budzinski, Rep. Smith, bipartisan) would bar members of Congress from insider trading on prediction markets. The Prediction Markets Security and Integrity Act (Senators Blumenthal and Kim) targets fraud and insider trading. Suspiciously timed trades on Iran military strikes and the Venezuelan regime change are driving much of this legislative urgency.
States continue legislating.
Eleven states introduced prediction market legislation in 2026, with approaches ranging from Hawaii’s proposed outright ban to Kentucky’s 17.25% tax framework on operator fees. The range of approaches, combined with the volume of federal litigation and Congressional activity, suggests that the legal landscape will look fundamentally different by the end of 2026.
The Bottom Line
Prediction markets are legal in the United States under federal law when operated on CFTC-regulated exchanges. That federal foundation is real, growing stronger, and backed by the CFTC’s public assertion of exclusive jurisdiction in 2026.
But “legal federally” does not mean “legal everywhere.” State enforcement has escalated to criminal charges. Nearly 50 active lawsuits span 14 or more states. Courts are split. At least seven Congressional bills are targeting the industry. Internationally, most countries classify prediction markets as gambling, and enforcement is accelerating. India banned them entirely in 2025.
If you are a US resident looking for the strongest legal protection, CFTC-regulated platforms are the clear starting point. Kalshi holds full DCM designation. Polymarket US operates through its acquired DCM. FanDuel Predicts routes through CME Group. Each carries meaningful federal regulatory oversight.
Check your state’s current enforcement posture before trading sports event contracts. Bookmark this article: we update it quarterly as court rulings, legislation, and CFTC rulemaking reshape the regulatory landscape.