Share 
Prediction market platforms have become more common in the United States over the past several years. In most cases, they offer event-based contracts tied to elections, the economy, weather, entertainment and sports.
As these markets gain visibility, a common question has emerged: Are prediction markets legal in the United States?
For the most part, prediction markets are legal in the US. However, their legality depends on several factors, including how operators are structured, the types of contracts they list and, crucially, the legal framework governing their activities. This guide examines US prediction markets and explains how their legality is determined.
Federal regulation and the gambling distinction
At the federal level, prediction markets are regulated by the Commodity Futures Trading Commission, or CFTC, which also oversees derivatives markets such as futures, options and swaps. Because event-based contracts are classified as regulated financial instruments, platforms offering these products fall under the CFTC’s jurisdiction.
As a result, these platforms must comply with federal rules related to transparency, market integrity and user protection to operate in the United States. This regulatory framework allows prediction markets to function legally when they meet the commission’s requirements.
This distinction is critical. When a prediction market operates as a financial trading system, it is not treated as a casino or sportsbook. Instead, it is governed by commodities law, which provides a clearer and more established legal foundation.
Prediction markets are often described as a form of betting. US law, however, generally distinguishes between gambling and financial speculation. Gambling typically involves wagering against an operator that sets fixed odds and maintains a house advantage. Prediction markets function differently.
Key differences include:
- No bookmaker setting odds centrally.
- Prices determined by user demand.
- The ability to trade positions before settlement.
- Market prices that function as probability signals.
Federal-state tensions, with sports at the center
Each US state has its own gambling laws and regulatory bodies responsible for enforcing them. Because prediction markets fall under CFTC oversight, conflicts can arise when platforms offer event contracts tied to sporting events.
Some states argue that these contracts closely resemble sports betting and should therefore be regulated under state gambling laws. In asserting their authority, state regulators may pursue legal or legislative actions that can lead to several outcomes:
- Certain states may impose restrictions on specific markets.
- Platforms may block access to sports-related contracts in some jurisdictions.
- Legal challenges may restrict or delay expansion.
Sporting event contracts are currently the most legally contentious category. Sports betting has long been governed at the state level, with laws addressing consumer protection, taxation and licensing. When prediction markets offer sports-style contracts, states may view them as competitors to licensed sportsbooks.
This does not mean prediction markets are illegal nationwide. Rather, certain event contracts may be unavailable in specific locations. For example, regulators in Connecticut have formally instructed Kalshi, Crypto.com and Robinhood to stop offering sports event contracts in the state.
Other types of contracts, including those tied to political, economic or climate-related events, face fewer obstacles because they are not traditionally classified as gambling.
Court rulings shaping the future of prediction markets
Recent court rulings have added complexity to the legal debate over sports event contracts. One notable case involves Kalshi, which challenged Nevada’s attempt to block the platform from offering such contracts. Kalshi initially secured a court victory when a judge ruled that Nevada could not take enforcement action against the company.
That position shifted in November 2025, when the same judge reached a different conclusion in a separate case involving Crypto.com. In that ruling, the court sided with the state. The decision weakened Kalshi’s position and underscored the uncertainty facing the industry. Despite the lack of legal clarity, prediction markets continue to grow.
What prediction market users should know about legal access
Prediction markets remain available to participants in many US states. Users can reduce potential issues by following several basic guidelines:
- Use platforms with clear regulatory status.
- Check whether specific markets are restricted in your state.
- Understand the distinction between event trading and sports betting.
Prediction markets with transparent operations, clear rules and appropriate oversight are increasingly gaining legitimacy as financial tools.
Outlook for prediction markets in the US
The legal outlook for prediction markets shows promise. Regulators, courts and lawmakers are developing clearer rules as understanding of these markets improves. Rather than imposing outright bans, the trend has been toward monitoring activity, managing risk and protecting consumers.
Prediction markets are also gaining recognition for their forecasting accuracy, information-gathering value and usefulness in political and usefulness in political and economic analysis.
Challenges remain. State-federal disputes may persist, and sports-related contracts will likely continue to face scrutiny. Still, the trend toward normalization appears stronger than efforts to limit the industry.
Are prediction markets legal in the US? Yes, when they are properly structured and regulated. While the legal environment is still evolving, prediction markets have established a significant presence with federal oversight. State-level concerns, particularly around sports-related contracts, remain, but they do not undermine the overall legitimacy of the model.
As regulation continues to mature, prediction markets are likely to become a standard part of the US financial and forecasting landscape, offering users a legitimate and innovative way to express views on real-world events.
