CFTC & Prediction Markets: US Regulatory Guide 2026

The US prediction market industry has transformed significantly over the past five years, driven by regulatory clarity, landmark court rulings, and a wave of new market participants. At the centre of this transformation stands the Commodity Futures Trading Commission (CFTC) — the federal agency that determines which event contract platforms may operate legally in the United States and under what conditions.

This guide maps the current regulatory landscape: the CFTC’s statutory authority over event contracts, Kalshi’s position as the benchmark US-regulated platform, the compliance history of Polymarket, the evolving 2026 rulemaking framework, the state-court fights over sports-related contracts, and the legal posture of offshore platforms for non-US traders.

Disclaimer: This article is for educational purposes only and does not constitute legal or financial advice. Regulatory requirements vary by jurisdiction. Check your own jurisdiction’s laws before using any financial platform.

What Is the CFTC and Why Does It Govern Event Contracts?

The Commodity Futures Trading Commission is an independent federal agency established by Congress in 1974 to regulate US derivatives markets — commodity futures, options, and swaps. Event contracts, which pay based on binary outcomes, fall within the CFTC’s jurisdiction because courts and the agency have consistently treated them as derivative instruments under the Commodity Exchange Act (CEA).

Event Contracts as CFTC-Regulated Derivatives Under the Commodity Exchange Act

The Commodity Exchange Act defines “commodity” broadly, and event contracts — also called prediction market contracts or binary event contracts — fit within that definition when they reference economic or financial outcomes. Congress specifically addressed event contracts in Section 5c(c)(5)(C) of the CEA, which grants the CFTC authority to prohibit contracts that are contrary to the public interest or that involve activity already regulated under a separate federal statute — such as gambling laws or securities law.

This provision has been the central legal battleground for US prediction market operators for over a decade. Platforms seeking to offer event contracts to US customers must either obtain CFTC registration as a Designated Contract Market, or accept that their contracts may be deemed unlawful under US law.

The Designated Contract Market (DCM) Designation — What It Means

A Designated Contract Market is a CFTC-registered exchange. To obtain DCM status, an exchange must satisfy 23 core principles covering financial safeguards, market surveillance, participant protections, and operational standards. DCM designation gives an exchange the legal authority to offer regulated derivatives — including event contracts — to US retail and institutional participants.

The DCM framework imposes ongoing obligations: mandatory segregation of customer funds, real-time market surveillance, reporting to the CFTC, and a clearly defined rulebook for settlement and dispute resolution. For traders, this framework means the exchange operates under federal oversight and its rules are CFTC-approved.

Kalshi — The US-Regulated Prediction Market Benchmark

Kalshi (KalshiEX LLC) is currently the most prominent US-regulated event contract exchange. It is the reference point for what CFTC-compliant prediction market operation looks like in practice, and its regulatory journey has shaped how the industry defines the path to operating within the US framework.

How Kalshi Obtained DCM Status (and What the Process Required)

According to CFTC Press Release 8302-20, the CFTC granted Kalshi DCM designation in 2020, making it the first entity to receive DCM status specifically for event contracts. The designation followed a multi-year application process that required demonstrating compliance with all 23 DCM core principles, sustained engagement with CFTC staff, and the establishment of operational infrastructure consistent with a regulated exchange.

Obtaining DCM status is not a one-time approval — it is an ongoing compliance obligation. Kalshi must maintain the financial safeguards, surveillance systems, and governance structures the CFTC requires of any registered exchange.

What CFTC Oversight Means for Traders: Segregated Funds, Market Surveillance, Transparent Settlement

DCM status translates into concrete protections for market participants. Customer funds held on a CFTC-designated exchange must be kept in segregated accounts, separated from the exchange’s own operational capital. This structure reduces counterparty risk compared with platforms operating without such requirements.

Market surveillance under CFTC oversight means the exchange must monitor for manipulation, wash trading, and other practices that distort market outcomes. Settlement criteria — the data and standards used to determine contract outcomes — must be clearly defined in the exchange’s CFTC-approved rulebook, which is publicly available.

Kalshi’s Legal Journey: Political and Sports Contracts

Kalshi’s expansion into politically sensitive and sports-related markets has been contested. The platform sought to offer event contracts on US congressional election outcomes — a category the CFTC initially opposed as contrary to the public interest under Section 5c(c)(5)(C). Litigation followed, and the legal question of where event contracts end and unlawful gambling begins has proceeded through federal courts.

That dispute has since widened into a direct clash between federal commodity law and state regulators over sports-related event contracts, producing the first federal appellate ruling on whether the CEA preempts state law for contracts listed on a designated market — litigation traced case by case in the section “Kalshi vs State Regulators” below.

Compare Kalshi and GADUIN side by side →

Why Polymarket and Others Historically Blocked US Users

Polymarket is among the most widely recognised prediction market platforms globally. Its regulatory history in the United States illustrates the compliance exposure platforms face when offering event contracts without CFTC registration.

The 2022 CFTC Enforcement Action Against Polymarket

In January 2022, the CFTC issued an enforcement order against Blockratize, Inc. (Polymarket’s then-operator), finding that the platform had operated unregistered binary options contracts and failed to register as a designated contract market or swap execution facility. The order resulted in a $1.4 million civil monetary penalty. Following this action, Polymarket ceased offering its platform to US persons and implemented geoblocking for US-based users.

This enforcement action established a clear precedent: offering binary event contracts to US participants without CFTC registration violates the Commodity Exchange Act, regardless of the platform’s technical architecture or blockchain underpinnings. That distinction — between unregistered binary options and exchange-listed event contracts — remains central to US product classification.

Polymarket’s Return: US Operations via CFTC-Regulated DCM (2025–2026)

Since the 2022 settlement, Polymarket has pursued a pathway to re-enter the US market through CFTC compliance. As of 2025–2026, the platform has made public steps toward obtaining or partnering with a CFTC-registered entity to offer event contracts to US participants under a regulated structure. This evolution reflects a broader industry shift: established prediction market platforms increasingly treat CFTC registration as the prerequisite for sustainable US market access, rather than an obstacle to route around.

How Offshore Platforms Exclude US Persons — Geoblocking and KYC

Platforms that operate as offshore exchanges — outside US jurisdiction — typically exclude US persons through a combination of IP-based geoblocking, identity verification (KYC) processes that screen for US nationality or residency, and Terms of Service that expressly prohibit participation by US persons. These measures reflect the legal reality that serving US participants with unregistered event contracts creates CFTC enforcement exposure.

No geoblocking or KYC system provides absolute guarantees. Users who circumvent these controls — through VPNs or misrepresentation during identity verification — bear personal legal risk. Platform-side exclusion mechanisms are a compliance tool, not a waiver of a user’s own legal obligations under applicable law.

Explore Polymarket alternatives for non-US traders →

The Evolving CFTC Framework: 2026 Proposed Rule

The regulatory landscape for event contracts in the US is not static. On June 12, 2026, the CFTC published a Notice of Proposed Rulemaking titled “Prediction Markets; Public Interest Determinations” (Federal Register Doc. 2026-11854, 91 FR 35806, RIN 3038-AF65) that proposes to codify how event contract permissibility is evaluated, including a definition of the term “gaming.” As of early August 2026 the proposal has not been adopted: the framework described below is proposed, not final, law.

The Three-Step Analytical Framework for Event Contract Permissibility

The June 2026 proposed rule (Federal Register Doc. 2026-11854) outlines a three-step analytical framework for determining whether a proposed event contract is permissible under Section 5c(c)(5)(C):

Activity category check: Does the contract involve gaming, activity unlawful under federal or state law, or activity regulated by another federal agency?
Public interest test: Is the contract contrary to the public interest — for example, because it creates incentives for criminal activity, manipulates voters, or introduces systemic risk?
Exemption analysis: Even where a concern is identified, does the contract serve a sufficient hedging, price-discovery, or risk-management function to warrant a specific exemption?

If adopted in final form, this framework would give platform operators clearer advance guidance on which event categories are viable under CFTC regulation. It also signals that the CFTC intends to maintain active oversight of the event contract product category, rather than deferring entirely to DCM self-regulation.

Federal vs. State Jurisdiction: Kalshi’s Legal Campaign Against State Gambling Laws

A recurring issue in the US event contract landscape is the collision between federal commodity law and state gaming statutes. Multiple states — including Nevada, New Jersey, and Maryland — issued cease-and-desist orders against Kalshi, arguing that event contracts on election and sports outcomes constitute gambling under state law and should be regulated at the state level. Kalshi filed for declaratory judgment and preliminary injunctions to contest these orders; the next section traces the litigation case by case.

Public Comment Period and What’s Next for Platform Operators

Comments on the June proposal closed on July 27, 2026; the CFTC has not announced a date for final action, and until a final rule appears in the Federal Register the existing case-by-case review under Section 5c(c)(5)(C) continues to apply.

It is not the only active event contract rulemaking. On July 1, 2026, the CFTC proposed “Data Reporting Requirements for Certain Event Contracts” (Federal Register Doc. 2026-13239, 91 FR 40102, RIN 3038-AF73), moving certain fully collateralized event contracts to an alternate reporting framework; comments closed July 31, 2026. And on August 6, 2026, it proposed “Conflicts and Affiliations” (Federal Register Doc. 2026-15948, 91 FR 50926, RIN 3038-AF76), addressing conflicts of interest and affiliate relationships for DCMs, swap execution facilities, clearing organizations, and futures commission merchants; comments run through October 5, 2026.

Together the three proposals amount to a complete rulebook for the prediction market category — product permissibility, data reporting, and exchange governance — and a more transparent, rule-based pathway for platforms operating in the US framework.

Kalshi vs State Regulators: What the Sports Contract Fights Mean for Event Contracts

No legal fight matters more to the event contract category than Kalshi’s standoff with state gaming regulators: it decides whether the CFTC alone determines what a designated exchange may list, or whether every state retains a veto within its borders.

The 2025 Filings: Nevada, New Jersey, Maryland

After the cease-and-desist orders of early 2025, Kalshi sued state officials in federal court: on March 28, 2025 against Nevada (KalshiEX LLC v. Hendrick, D. Nev., No. 2:25-cv-00575) and New Jersey (KalshiEX LLC v. Flaherty, D.N.J., No. 1:25-cv-02152), and on April 21, 2025 against Maryland (KalshiEX LLC v. Martin, D. Md., No. 1:25-cv-01283). The district courts split: in April 2025 the Nevada and New Jersey courts each granted Kalshi a preliminary injunction, while on August 1, 2025 Judge Adam B. Abelson in Maryland denied one — a dispute now before the Fourth Circuit.

The Third Circuit Ruling — and the Nevada Reversal

In KalshiEX LLC v. Flaherty, No. 25-1922 — argued September 10, 2025, decided April 6, 2026 — the Third Circuit became the first federal appeals court to reach the preemption question. A divided panel (2-1, Judge Roth dissenting) affirmed the New Jersey injunction, reasoning that sports-related event contracts traded on a designated market are swaps within the CEA’s exclusive-jurisdiction grant, and that the Act preempts state laws that directly interfere with trading on DCMs.

Nevada shows the ground can shift. On November 24, 2025, Chief Judge Andrew P. Gordon dissolved the preliminary injunction he had entered in April, and Kalshi immediately sought an emergency stay pending appeal — moving that fight to the Ninth Circuit.

The 2026 Wave: More States Join

The fights widened through 2026: Kentucky brought a federal-court action against Kalshi in June 2026 (Commonwealth of Kentucky v. KalshiEX LLC, E.D. Ky., No. 3:26-cv-00048); Kalshi sued the Illinois Attorney General on June 23, 2026 (KalshiEX LLC v. Raoul, N.D. Ill., No. 1:26-cv-07363); and a New York Attorney General action against Kalshi was docketed in the Southern District of New York on July 31, 2026 (No. 1:26-cv-06550).

The stakes reach beyond sports because preemption is decided for the venue, not the product: if the CEA shields DCM-listed contracts from state gambling law, the shield covers every category a designated exchange lists — transport disruption included; if states prevail, each category could face fifty separate regulatory regimes.

Offshore Event Contract Platforms and Access for Non-US Traders

The majority of global event contract trading volume flows through platforms that operate outside the United States. For non-US traders, these platforms represent the primary access point for prediction market exposure. Understanding what “offshore” means — legally and practically — is foundational to informed participation.

What “Offshore” Means Legally and Practically

“Offshore” in the context of event contract exchanges refers to platforms incorporated and operated outside US jurisdiction — typically in jurisdictions such as the British Virgin Islands, Seychelles, Gibraltar, or Malta, which permit event contract or prediction market activities under local regulatory frameworks. These platforms are not registered with the CFTC, do not hold DCM status, and are not legally authorised to serve US persons.

For non-US traders, the legal status of an offshore platform depends entirely on the laws of the trader’s own jurisdiction. In many countries, accessing an offshore event contract exchange is straightforwardly lawful for retail participants. In others, there may be restrictions on certain product types, capital controls, or local licensing requirements. The applicable law is the law of the user’s jurisdiction — not US law, and not the jurisdiction of the exchange’s incorporation.

User Responsibility and Jurisdictional Due Diligence

Using any financial platform — regulated or offshore — carries legal and financial responsibility. Traders on offshore event contract exchanges should confirm that accessing such platforms is lawful under the laws of their own country or jurisdiction, review the platform’s Terms of Service carefully (particularly provisions concerning eligibility and exclusions), and understand that offshore platforms are not subject to the same participant protection frameworks as CFTC-designated exchanges. There is no federal segregated-funds requirement, no CFTC market surveillance mandate, and no US regulatory recourse channel.

This does not mean offshore platforms are unregulated in all respects — many operate under the laws of their home jurisdiction — but the regulatory framework is materially different from CFTC oversight, and the protections available to participants differ accordingly.

Where GADUIN Fits in the Global Event Contract Landscape

GADUIN is an offshore event contracts exchange operating in the transport delay niche — offering markets on flight delays, train disruptions, and maritime incidents, with settlement in USDT. It is not registered with the CFTC, does not hold DCM status, and does not accept US persons as participants.

GADUIN as an Offshore Event Contracts Exchange

GADUIN’s product focus is transport event contracts: outcomes such as whether a specific flight will be delayed by 15 or more minutes, whether a train service will arrive within schedule, or whether a container vessel will arrive outside its expected window. Positions are settled in USDT based on verifiable real-world data — flight status APIs, rail operator records, port authority data.

Like other offshore platforms, GADUIN operates outside CFTC jurisdiction. Access for US persons is restricted through KYC verification and Terms of Service in accordance with applicable regulatory requirements. For non-US traders seeking exposure to transport delay outcomes — or looking to take a position on the probability of travel disruption — GADUIN provides a specialised event contract market that is not replicated on CFTC-regulated US exchanges.

GADUIN vs Polymarket: transport vs political markets →

Access and Legal Responsibility: Individual Users Must Check Their Own Jurisdiction

GADUIN’s availability is subject to the laws of each user’s jurisdiction. The platform’s Terms of Service define eligibility criteria, and each user bears independent responsibility for confirming that their participation complies with applicable local law. GADUIN is not a licensed or regulated platform in the United States and is not available to US persons.

As with all offshore financial platforms, access does not imply legal clearance. Each trader is responsible for understanding the rules that govern their participation, including applicable tax treatment of any trading outcomes.

Learn how flight delay event contracts work on GADUIN →

What US Traders Should Watch in Late 2026

None of what follows is a forecast — these are observable public markers for the second half of 2026:

Final action on “Prediction Markets; Public Interest Determinations” (RIN 3038-AF65). Comments closed July 27, 2026; watch the Federal Register for a final rule and for how the definition of “gaming” lands.
The “Conflicts and Affiliations” comment file (RIN 3038-AF76), open through October 5, 2026. Comments from exchanges and clearing firms will signal how DCM-operated prediction markets will be governed internally.
The appellate calendar. The Ninth Circuit has the Nevada injunction dissolution, the Fourth Circuit has the Maryland dispute, and the Third Circuit’s April 2026 ruling stands opposite. A circuit split on CEA preemption is the classic setup for Supreme Court review.
New categories reaching DCMs. Watch exchange rule filings and contract certifications for the event categories designated markets list next.

Frequently Asked Questions

Is it legal to use offshore prediction markets as a non-US user?

It depends on your jurisdiction. In many countries, accessing an offshore event contract exchange is lawful for retail participants. In others, there may be restrictions on certain product types. US law expressly prohibits US persons from using unregistered event contract platforms. For all other users, the relevant legal standard is the law of their own country — not US law, and not the jurisdiction where the exchange is incorporated.

What is a CFTC Designated Contract Market?

A Designated Contract Market (DCM) is an exchange registered with the US Commodity Futures Trading Commission under the Commodity Exchange Act. DCM status authorises the exchange to offer regulated derivatives, including event contracts, to US participants. It requires ongoing compliance with 23 CFTC core principles covering financial safeguards, market surveillance, and governance. Kalshi is currently the most prominent example of a DCM offering event contracts.

Why can’t US persons use Polymarket’s international platform?

Following a January 2022 CFTC enforcement order against Polymarket’s then-operator (Blockratize, Inc.), the platform ceased offering its services to US persons and implemented geoblocking for US users. The enforcement action found that the platform had operated unregistered binary options contracts in violation of the Commodity Exchange Act. US persons remain excluded from the international version of the platform; US-facing access is only legally possible through a CFTC-registered entity.

Is GADUIN regulated by the CFTC?

No. GADUIN is an offshore event contracts exchange and is not registered with or regulated by the CFTC. It does not hold Designated Contract Market status and does not accept US persons as participants. Users outside the US should consult the laws of their own jurisdiction before using the platform.

Is trading transport delay event contracts legal in the US?

For US persons, event contracts are lawful only on CFTC-registered venues, and whether a transport delay contract is available depends on what those venues list. GADUIN, which specialises in transport delay markets, operates offshore and does not accept US persons; traders elsewhere are governed by the law of their own jurisdiction. This is general information, not legal advice — see the disclaimer at the top of this article.

This article is for educational purposes only and does not constitute legal or financial advice. Regulatory requirements vary by jurisdiction. Consult a qualified legal professional for advice specific to your situation.