Are prediction markets legal in the US?
The federal framework#
Event contracts are derivatives under the Commodity Exchange Act (CEA). An exchange that wants to list them for US customers registers with the CFTC as a designated contract market (DCM) and lists contracts under the CFTC's rules, usually by self-certifying them.
The CEA gives the CFTC a specific tool for event contracts. Under CEA section 5c(c)(5)(C), implemented in CFTC Rule 40.11 (17 CFR 40.11), the Commission may prohibit event contracts that involve activity that is unlawful under federal or state law, terrorism, assassination, war, gaming, or similar activity it determines by rule to be contrary to the public interest. Most of the legal fights over prediction markets are about what falls within these categories, particularly "gaming".
| Question | Short answer (as of October 2026) |
|---|---|
| Can a US exchange list event contracts? | Yes, as a CFTC-designated contract market, subject to the CEA and CFTC rules. |
| Can the CFTC block specific event contracts? | Yes, under Rule 40.11 for enumerated categories, after review; its use against election contracts was rejected in court in 2024. |
| Are election contracts allowed? | Following Kalshi v. CFTC, election contracts have been listed on a regulated US exchange since late 2024. |
| Can states regulate them as gambling? | Contested. States argue sports contracts are gambling; exchanges and the CFTC argue federal law pre-empts state law for DCM-listed contracts. |
Kalshi v. CFTC: election contracts#
In 2023 the CFTC disapproved contracts proposed by Kalshi, a CFTC-designated exchange, on which party would control each chamber of Congress, citing the gaming and unlawful-activity categories and the public interest. Kalshi sued. In September 2024 the US District Court for the District of Columbia (Judge Jia M. Cobb) ruled for Kalshi, holding that the CFTC's order exceeded its statutory authority and that the contracts did not involve unlawful activity or gaming as the statute uses those terms.
The CFTC appealed and sought a stay. The D.C. Circuit denied the stay on 2 October 2024, and election contracts began trading on a regulated US exchange ahead of the 2024 election. In May 2025 the CFTC filed an unopposed motion to dismiss its appeal, leaving the district court's decision in place.
The state challenges, 2025–2026#
With election contracts settled, the dispute moved to sport. Sports-related event contracts grew quickly on regulated exchanges, and state gaming regulators in a number of states issued cease-and-desist letters or brought actions, arguing that the contracts are unlicensed sports betting under state law. Exchanges responded that, as contracts listed on a federally regulated DCM, they fall under the CFTC's exclusive jurisdiction and that state gaming law is pre-empted.
In 2026 the CFTC itself took the exchanges' side in court. Its chair publicly asserted exclusive federal jurisdiction, and the agency filed suits against several states over their actions, including a May 2026 suit challenging a Minnesota law that criminalised operating or promoting prediction markets. The outcome of these cases, and of related legislative proposals in Congress, will decide whether event contracts on sport are treated nationally as derivatives or state by state as gambling.
Offshore and on-chain markets#
Platforms that offer event contracts to US persons without registering face CFTC enforcement. In January 2022 the CFTC settled charges with Polymarket for offering event-based binary options without registration; the order required it to pay a $1.4 million civil monetary penalty and wind down non-compliant markets. Polymarket subsequently restricted US access to its international platform and in 2025 acquired a CFTC-licensed exchange and clearinghouse to offer a regulated US product. The general rule for US persons: a venue's regulatory status, not its technology, determines whether trading on it is permitted.
Outside the US#
Treatment varies widely. In the UK, betting exchanges are licensed by the Gambling Commission, and some event-style products fall under financial regulation instead. Several EU states treat prediction markets as gambling requiring a local licence, and some have blocked access to offshore platforms. Anyone trading or operating across borders needs jurisdiction-specific advice.
For our part, Libertas Veritas Prosperitas trades only where it is lawful for us to do so and follows the rulebook of every venue it accesses (see About).
Questions#
Are prediction markets legal in the US?
Event contracts are legal when listed on a CFTC-designated contract market and traded under its rules. Whether states may regulate some contracts, especially on sport, as gambling is being litigated as of 2026.
What was the Kalshi v. CFTC case about?
The CFTC blocked Kalshi's contracts on which party would control Congress. In September 2024 a federal district court ruled the CFTC had exceeded its authority; the CFTC dropped its appeal in May 2025, and election contracts are listed on a regulated US exchange.
Who regulates prediction markets in the US?
The Commodity Futures Trading Commission regulates event contracts listed on designated contract markets. State gaming regulators have challenged sports-related contracts, and that jurisdictional dispute is unresolved.
References#
- Commodity Exchange Act §5c(c)(5)(C), 7 U.S.C. §7a-2(c)(5)(C); CFTC Regulation 40.11, 17 CFR §40.11.
- KalshiEx LLC v. Commodity Futures Trading Commission, No. 1:23-cv-03257 (D.D.C. Sept. 2024) (Cobb, J.); appeal No. 24-5205 (D.C. Cir.).
- D.C. Circuit order denying the CFTC's emergency motion for a stay pending appeal, 2 October 2024; CFTC unopposed motion for voluntary dismissal of appeal, 5 May 2025.
- In re Blockratize, Inc. d/b/a Polymarket.com, CFTC Docket No. 22-09 (January 3, 2022); CFTC Release No. 8478-22.
- Axios (17 February 2026). U.S. commission fights states on prediction markets: "We will see you in court".
- FIA MarketVoice (2026). Surging volumes have prediction markets facing a legal reckoning in the US.
DisclosureThis note is research and education. It is not investment advice or an offer to trade, and nothing in it describes the firm's own results.