Are Prediction Markets
Legal in the US?
Yes, but the answer has layers. Federally regulated prediction markets like Kalshi and Polymarket QCEX are legal in most US states under CFTC jurisdiction. They are commodity contracts under federal law, not gambling under state gaming law. This guide explains the federal framework, why states can't simply ban them, what "legal" actually means for a trader, and the handful of states where friction exists.
The quick legality verdict by platform
CFTC-licensed DCM. Federal jurisdiction overrides state gaming laws. No state has successfully blocked Kalshi.
CFTC-licensed via QCEX acquisition (Dec 2025). New York currently blocked. Waitlist-only nationally.
Robinhood embeds Kalshi's CFTC-regulated contracts. Same federal framework as Kalshi.
CFTC no-action letter exemption. Limited to US political markets, $850 per contract cap, 5,000 trader limit per market.
Mana is play money with no cash value. Sweepcash prize-based features governed by sweepstakes law: not gambling.
Prediction markets without CFTC licensing that accept US customers are operating illegally. Avoid.
Why CFTC regulation makes prediction markets legal nationwide
The legal foundation for prediction markets in the US is the Commodity Exchange Act (CEA) and the CFTC's exclusive jurisdiction over commodity contracts. When the CFTC licenses a platform as a Designated Contract Market (DCM), it is making a federal determination that those contracts are lawful commodity products: not gambling.
- Platform is a federally licensed exchange
- Contracts are commodity derivatives under federal law
- CFTC preemption limits state interference
- Customer funds must be segregated (CFTC Part 190)
- Anti-manipulation and reporting rules apply
- Supremacy Clause: federal law preempts conflicting state law
- CEA explicitly preempts state gaming laws for CFTC-regulated contracts
- States can complain: as NJ and NV have, but cannot unilaterally block CFTC-licensed platforms
- Kalshi proved this in federal court in 2024 (D.C. Circuit)
The 2024 Kalshi court ruling: The CFTC initially blocked Kalshi's political event contracts under a "gaming" interpretation. Kalshi sued. The D.C. Circuit Court ruled in Kalshi's favor in September 2024, finding the CFTC had overstepped. This ruling is the legal foundation that confirmed prediction market binary event contracts are lawful commodity products under the CEA: not gambling products subject to state gaming laws.
Why prediction markets aren't "gambling" under the law
The legal distinction between prediction markets and gambling matters because state gambling prohibitions can't reach federally licensed commodity contracts. The key differences under US law:
- Licensed by state gaming commissions
- Regulated under state gambling statutes
- House edge is structural: players can't win long-term
- Outcome is (often) pure chance
- UIGEA (2006) applies to illegal online gambling payments
- Licensed by CFTC as commodity exchanges
- Regulated under the Commodity Exchange Act
- Buyers and sellers set prices: no house edge built in
- Informed traders can and do win consistently
- UIGEA explicitly exempts commodity contracts
Prediction market status across US states
Most states are fully open to prediction markets. A few have created friction: primarily states with strong gaming regulatory bodies that assert jurisdiction over anything resembling wagering. No state has successfully blocked a CFTC-licensed platform through legal action. The notable friction points:
Are sports prediction market contracts legal?
Sports event contracts on CFTC-regulated platforms are legal, but this is the most contested area. New Jersey and Nevada have objected specifically to Kalshi offering sports-outcome contracts, arguing they fall under their sportsbook licensing requirements. The CFTC disagrees. As of May 2026, Kalshi continues to offer sports contracts nationwide, including in NJ and NV.
Binary yes/no contracts on sports outcomes (Super Bowl winner, NBA champion, etc.) are federally regulated commodity contracts. Available nationwide under CFTC preemption. NJ and NV have objected but no court has ruled in their favor.
Sports betting is illegal in Georgia: yet Kalshi sports contracts are fully legal there. This is the most vivid demonstration of CFTC preemption: federal commodity law overrides the state's prohibition on sports wagering.
Practical legal guidance for US prediction market traders
- 1 Use CFTC-licensed platforms
Kalshi, Polymarket QCEX, and Robinhood (via Kalshi) are the legal options for US traders. Manifold (play money) and PredictIt (no-action exemption) are also legal. Unregulated platforms that accept US users are not legally protected.
- 2 Prediction market winnings are taxable
Legal doesn't mean tax-free. Kalshi issues a 1099-MISC for net annual profits. Polymarket QCEX requires self-reporting. Report prediction market income as ordinary income on your federal and state returns. Consult a tax professional for large positions.
- 3 Check your state page for local nuances
While CFTC preemption is broad, some states have created specific restrictions (NY blocking Polymarket, NJ disputing Kalshi sports contracts). Check the state-specific page for wherever you live to know the current status and any platform-specific restrictions.
- 4 Your funds are protected by CFTC rules
CFTC Part 190 requires customer funds at DCMs to be held in segregated accounts separate from the platform's operating capital. Unlike unregulated crypto exchanges (e.g., FTX), Kalshi and QCEX cannot use your trading funds for their own purposes.
Common legal questions
Are prediction markets legal in the United States? +
Yes: CFTC-licensed prediction markets (Kalshi, Polymarket QCEX, Robinhood via Kalshi) are legal in most US states. They are commodity contracts under federal law, not gambling under state gaming law. CFTC preemption protects them from state bans.
Is Kalshi legal? +
Yes. Kalshi is a CFTC-licensed Designated Contract Market (DCM) and is legal in all 50 US states. It won a federal court case in 2024 confirming this. Sports, political, economic, and weather contracts are all available nationwide.
Is Polymarket legal in the US? +
Polymarket QCEX (the US-licensed version) is legal in most states: New York is currently blocked. The original Polymarket on Polygon is not available to US users. Use QCEX for legal US access.
Can states ban prediction markets? +
States cannot ban CFTC-licensed prediction markets through gaming law, because federal law preempts conflicting state statutes. States can create friction (NJ, NV have disputed specific contracts) but no state has won a court ruling blocking a CFTC-licensed platform. Kalshi's 2024 court win reinforced this.
Are prediction market winnings taxable? +
Yes. Prediction market profits are ordinary income at the federal level (reported on Schedule 1). Kalshi issues a 1099-MISC for net annual profits. Polymarket QCEX does not issue a 1099: self-report required. Losses are deductible (not subject to the OBBBA 90% sports betting loss cap).
Is PredictIt legal? +
PredictIt operates under a CFTC no-action exemption letter: not a full DCM license. This means it's allowed to operate as long as it stays within the stated limits: US political markets only, $850 per contract cap, 5,000 trader limit per market. Within those limits, PredictIt is legal for US traders.
More legal and regulatory guides
CFTC and prediction markets
How CFTC licensing works, DCM requirements, and the regulatory history of event contracts in the US.
SafetyIs Kalshi safe?
CFTC regulation, fund segregation under Part 190, 5-year track record, and the real risks of trading on Kalshi.
State guideAll US states
State-by-state breakdown of prediction market access, sports betting laws, and platform availability.