Key takeaways

  • In the US, prediction markets are regulated at the federal level by the CFTC as event contracts, not as gambling.
  • Several states disagree, especially about sports contracts, and the fight is now in federal courts in at least nine states.
  • Trading volume exploded anyway: Kalshi and Polymarket together went from under $2 billion a month in mid-2025 to about $53 billion in July 2026.
  • Whether you can use a given market depends on the platform and where you live, so check before you trade.

Why Everyone Is Suddenly Talking About Prediction Markets

A prediction market lets you buy a contract that pays out if something happens: a team wins, an election goes one way, inflation comes in above a number. Prices move between $0 and $1, so a price of $0.70 roughly means the market thinks there is a 70% chance. If you are new to how they work, start with our beginner's guide to prediction markets.

What changed in the last year is scale. Combined monthly volume on the two largest platforms, Kalshi and Polymarket, grew from under $2 billion in mid-2025 to about $53 billion in July 2026, with sports now the largest category. In June 2026 alone, World Cup contracts helped push Kalshi to roughly $31.5 billion and Polymarket to roughly $10.8 billion in monthly volume. Growth that fast has turned a niche product into a political and legal fight.

Who Regulates Prediction Markets in the US?

At the federal level, prediction markets are regulated by the Commodity Futures Trading Commission (CFTC). Platforms that register as a Designated Contract Market (DCM) can list event contracts nationwide, in the same legal category as other futures and derivatives.

Polymarket, which had blocked US users since a 2022 settlement with the CFTC, returned to the US on December 3, 2025 as a CFTC-regulated exchange after acquiring QCX, an already licensed exchange. Kalshi has operated as a CFTC-regulated exchange for longer. By April 2026, Polymarket's US exchange was handling about $1.3 billion a month, compared with roughly $9 billion on its international platform.

Why States Are Pushing Back

Many states regulate gambling, and they argue that a contract on the outcome of a football game is a sports bet no matter what a federal agency calls it. States also lose tax revenue and licensing control when sports contracts are offered outside their gambling systems.

The conflict escalated quickly in 2026:

  • April 2, 2026: the CFTC and the Department of Justice sued Arizona, Connecticut, and Illinois over actions against prediction markets.
  • April and May 2026: courts in Nevada blocked Kalshi (April) and Polymarket (May 29) from offering contracts there.
  • June 2026: a suit against Kentucky brought the number of states the CFTC is fighting in court to nine. Attorneys general from 44 states have opposed the CFTC's claim that it alone has authority.
  • July 27, 2026: a Minnesota law that would have made offering these markets a felony was blocked.
  • October 9, 2026: arguments are scheduled in the Kentucky case, one of several that could shape the outcome.

The core legal question is whether federal commodities law preempts state gambling law for these contracts. Different courts have reached different answers, which is why the issue is likely to keep moving through appeals.

Is It Gambling or Trading?

The honest answer is that it depends on who you ask, and on the contract. Supporters point out that prediction markets work like any exchange: you trade against other people, not against a house that sets the odds, and prices aggregate real information. Critics argue that a contract on a single game looks and feels like a bet, and that consumer protections from gambling law, such as age checks and problem-gambling tools, should apply.

For you as a user, the practical difference is mostly about where a market is available and what protections come with it, not about how a contract works.

What This Means for You

  1. Check availability where you live. A market that is open in one state or country may be blocked in another, and platforms change access as court rulings come in.
  2. Use regulated, transparent platforms. Look for clear rules on how each market is resolved and where the resolution data comes from.
  3. Size positions like any risky trade. Only use money you can afford to lose. Our guide to capital allocation covers sensible position sizing.
  4. Keep records for taxes. Winnings may be taxable, and the rules differ by country.

What Happens Next

The most likely path is more court rulings, appeals, and possibly a decision from a higher court or new legislation that settles whether federal or state rules apply to sports contracts. Contracts on economics, weather, and other non-sports events have drawn far less opposition and are likely to remain widely available while the sports question is fought out.

Outside the US, the picture varies country by country. Our overview of global crypto regulation is a good starting point.

Frequently asked questions

Are prediction markets legal in the US?

At the federal level, platforms registered with the CFTC can offer event contracts nationwide. Several states dispute this for sports contracts, and courts in some states, such as Nevada, have blocked them.

Is Polymarket legal in the US?

Polymarket returned to the US on December 3, 2025 as a CFTC-regulated exchange after acquiring QCX. Availability can still depend on court rulings in individual states.

Are prediction markets gambling?

It depends on who you ask. Supporters say they are exchanges where people trade with each other; many states argue contracts on sports outcomes are sports betting.

How big are prediction markets now?

Kalshi and Polymarket together grew from under $2 billion in monthly volume in mid-2025 to about $53 billion in July 2026.

This article is for educational purposes only and is not legal or financial advice. Laws and court rulings are changing quickly; check the current rules where you live.

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