Prediction Market Regulation: Where Are Prediction Markets Legal? State By State Breakdown

Prediction market sites, platforms that let users buy and sell contracts based on the outcomes of future events, have grown rapidly in popularity over the past decade. From elections and economic indicators to sports and cultural events, these markets allow users to speculate and potentially profit by predicting what will happen next.

Unlike traditional sportsbooks, which are regulated at the state level, many prediction market apps operate under federal oversight, primarily through the Commodity Futures Trading Commission (CFTC). Federal law, such as the Commodity Exchange Act, provides the legal basis for federal regulation of prediction markets, but state laws and state regulation can still create additional hurdles for operators. As a result, prediction markets legal status is increasingly recognized across all 50 states, with recent regulatory developments and court rulings supporting their legitimacy.

However, the reality is more nuanced. Even when federally regulated, prediction markets face state-level legal challenges, cease-and-desist orders, and regulatory scrutiny. Enforcement action by state regulators can result in cease-and-desist orders or litigation against platforms. Understanding the legal landscape is critical for users who want to participate safely and legally.

While often compared to gambling, prediction markets gambling is distinct because these platforms are legally regulated by the CFTC and serve broader purposes such as speculation and hedging, not just wagering. Most prediction markets are regulated as financial instruments, not gambling, under federal law. This page outlines the current legal status of major U.S. prediction market platforms, how regulation works, and what users need to know before engaging with these markets.

On such markets, people bet on the outcomes of future events by buying and selling contracts tied to specific results.

Key notes on prediction markets

• Prediction markets claim they are legal in all 50 states and regulated through the CFTC, though this could change with litigation
• 10 total states have sent cease and desists to prediction market platforms
  • There are 18 total court battles across multiple jurisdictions
• Huge players like DraftKings, FanDuel, & Fanatics have entered the market in late 2025
• Nevada is now 5-0 in cases against prediction market platforms Kalshi, Robinhood, Crypto, Coinbase,& Polymarket

Prediction Market legal status: State-by-state breakdown

Technically, all 50 states are “legal”, but they might have active cease & desists or other pending litigation. Check our list of all states statuses here:

Introduction to prediction markets

Prediction markets are innovative online platforms that allow users to trade event contracts based on the outcomes of future events, ranging from sports and politics to economics, pop culture, and election related contracts. Unlike traditional online sportsbooks, which focus solely on sports betting, prediction markets operate more like financial markets such as the New York Stock Exchange. On these platforms, users buy and sell event contracts, with prices fluctuating according to the collective predictions of all market participants. Some platforms offer a one platform solution for trading on sports, politics, and other events.

At their core, prediction markets harness the wisdom of the crowd. By aggregating the insights and expectations of thousands of traders, these markets often generate remarkably accurate forecasts for uncertain events, whether it’s the result of a presidential election, the next move by the Federal Reserve, or even the winner of Best Picture at the Oscars. Users can trade event contracts to speculate on outcomes, hedge against risks, or simply test their forecasting skills.

A key feature of prediction markets is their regulatory structure. Most major U.S. platforms operate under the oversight of the Commodity Futures Trading Commission (CFTC), which treats event contracts as regulated financial instruments. Real money prediction markets face unique regulatory challenges due to their classification under federal law. This framework is similar to how futures contracts are traded on established exchanges like the CME Group or the New York Stock Exchange, providing a level of security and transparency for users. On a CFTC-regulated exchange, users can trade event contracts with confidence, knowing that the platform is subject to federal oversight and compliance standards.

Trading on prediction markets is straightforward: users can buy contracts if they believe an event will occur, or sell contracts if they think it won’t. The price of each contract reflects the market’s consensus probability of the event happening and represents the market’s collective belief about the likelihood of the event. For example, if a contract predicting a certain candidate will win the presidential election is trading at $0.50, the market is implying a 50% chance of that outcome. Traders can open positions, place limit orders, and manage their risk much like they would on other financial markets.

Prediction markets offer several advantages, including low fees, competitive bid-ask spreads, and the ability to trade on a wide variety of current events, economic indicators, and even natural disasters. High trading volume in popular markets ensures liquidity and ease of trading. They also provide a unique alternative to traditional investment and online sports betting, allowing users to engage with real-world events in a dynamic, market-driven environment.

However, as with any trading platform, there are risks. Prices can be volatile, and users may lose their investment if their predictions are incorrect. Additionally, the legal status of prediction markets is still evolving, with state regulators and federal agencies sometimes at odds over how these platforms should be classified, whether as financial markets, gambling, or something in between.

To help you navigate this rapidly changing landscape, this guide will explain how prediction markets work, the types of event contracts available, and the benefits and risks of trading on these platforms. We’ll also cover the latest legal developments, so you can make informed decisions about where and how to participate.

History and development

The roots of prediction markets stretch back centuries, with early forms appearing as informal bets on election outcomes and commodity prices. These early markets laid the groundwork for what would become a sophisticated industry. The modern era of prediction markets began in the early 2000s, marked by the launch of pioneering platforms like the Iowa Electronic Markets and Intrade. These platforms allowed users to trade contracts on a variety of real-world events, including election outcomes, sports, and trends in financial markets.

As the industry matured, the regulatory landscape evolved. A major milestone came in 2018, when Kalshi was founded with the goal of creating a fully regulated prediction market exchange. In 2020, Kalshi received approval from the Commodity Futures Trading Commission (CFTC), becoming the first platform of its kind to operate as a federally regulated exchange for event contracts. This approval signaled a new era for prediction markets, opening the door for more platforms to offer trading on sports event contracts, election markets, and other types of event contracts under federal oversight.

Since then, the industry has seen rapid growth and diversification. New platforms have emerged, and existing ones have expanded their offerings to include a broader range of contracts, from financial markets to pop culture events. The involvement of the futures trading commission CFTC has provided a regulatory framework that supports innovation while aiming to protect users. Today, prediction markets are recognized as a dynamic intersection of finance, technology, and speculation, with trading activity spanning everything from presidential elections to major sporting events.

Latest news on prediction markets

• Arizona Department of Gaming Comes After Underdog – The Arizona Department of Gaming has notified Underdog that they intent to revoke their license in the state of Arizona due to its offering of predictions.
• Fanatics Launches Their New Prediction Product – Fanatics Markets went live on December 3rd, and now operates in 24 states in the U.S.
• Polymarket Goes Live In U.S. – Polymarket officially launches in the U.S., giving access to customer that joined their waitlist. Sports will be their only offering to start.
• Polymarket 60 Minutes Interview Releases – Shane Coplan appears on 60 Minutes, and breaks down Polymarket, what it offers, and some of the major trades on the platform.
• Kalshi’s Suffers Legal Loss In Nevada – Nevada courts ruled that Kalshi’s sports-focused prediction market contracts are subject to state gambling laws, challenging the company’s claim that federal CFTC oversight exempts it from regulation.
• Kalshi Faces Lawsuit Over Market Makers – Kalshi is facing a proposed class‑action lawsuit claiming it illegally operates as a sports bookmaker — with its “market‑maker” affiliate allegedly betting against ordinary users and misleading them about the true nature of their wagers.
• Major Sportsbooks Enter Prediction Markets – FanDueland DraftKings are launching prediction‑market offerings to reach states where traditional sports betting is limited, signaling mainstream adoption but also increased regulatory scrutiny.

How prediction markets differ from sportsbooks legally

Sportsbooks operate under a state-by-state regulatory framework. Each state decides if online sports betting is legal, the licensing requirements for operators, and rules for consumer protections, minimum age, and payouts. This patchwork creates a clear map for users: if your state has licensed sportsbooks, you can legally place a bet. If not, you cannot.

Prediction markets often rely on a different legal pathway. Platforms like Kalshi and Robinhood’s event markets are regulated federally as derivatives or event contracts rather than traditional gambling. By classifying contracts as financial instruments, these platforms can, in theory, operate nationwide, bypassing the state-specific restrictions that sportsbooks face. Some platforms, such as Polymarket after acquiring QCEX, operate as a licensed derivatives exchange, which helps them meet regulatory requirements and gain approval for offering event contracts.

This federal approach provides potential nationwide coverage, but it is not without complications. States can and have challenged prediction markets when their contracts resemble traditional sports bets. For example, certain sports-focused contracts may be interpreted as illegal under state law despite the platform’s federal CFTC registration. As a result, availability can differ not just by state but by contract type, platform, and ongoing legal battles. Regulators often weigh the public interest when determining how to classify and oversee prediction markets.

Major U.S. platforms and their legal status

Kalshi

Kalshi is widely regarded as the most established federally regulated prediction market in the U.S. The platform claims it is legal in all 50 states, leveraging CFTC registration as a designated contract market. Users can trade contracts on a wide range of events, including politics, economics, and sports.

Despite this broad claim, some states have challenged Kalshi’s legality, particularly for sports-related contracts. For instance, New Jersey and Massachusetts have scrutinized whether certain contracts constitute illegal gambling under state law. Users should be aware that while Kalshi advertises nationwide access, availability can be limited in specific jurisdictions due to legal disputes.

Polymarket

Polymarket is a crypto-native prediction market that has finally relaunched for U.S. users, following a 2022 settlement with the CFTC in which it agreed to stop offering its service. While Polymarket has global operations, it is currently giving access to a limited number of U.S. residents and is only offering sports contracts. The platform plans to launch to the broader public soon and introduce additional markets to trade on. To help meet U.S. regulatory requirements and operate legally again, Polymarket acquired QCEX, a licensed derivatives exchange. Its crypto-based structure introduces additional regulatory complexities, including compliance with securities and commodities laws.

Fanatics Markets

Fanatics Markets is a newly launched U.S.-focused prediction‑market platform from Fanatics, designed to let users trade ““”event contracts””” on a wide variety of outcomes, from sports and finance to culture and politics. The platform draws on pricing and market infrastructure from Crypto.com Derivatives North America (CDNA), a federally registered derivatives exchange and clearinghouse.

Fanatics says its launch covers 24 U.S. states, with the first wave going live in 10 states, and more states to follow in coming days. In Phase 1, contracts span sports, economics, finance, and politics; Fanatics says it will expand in a second phase to include crypto, stocks/IPOs, pop culture, tech, music, movies, and more.

Because Fanatics Markets partners with a CFTC‑registered exchange, the platform positions itself as a federally compliant alternative to traditional betting. That said, just like other prediction‑market platforms, it may face the same kinds of legal/regulatory scrutiny, especially in states where sports‑related event contracts overlap with gambling‑regulation laws.

DraftKings Predictions

DraftKings Predictions is a U.S.-focused prediction-style offering from DraftKings that allows users to engage with outcome-based markets tied primarily to sports and major real-world events. Built on DraftKings’ existing sportsbook and technology infrastructure, the product leverages the company’s deep experience in odds-making, liquidity management, and regulated gaming to offer contract-style predictions that resemble traditional betting markets while emphasizing event outcomes rather than fixed wagers.

DraftKings Predictions operates in states where DraftKings already holds gaming licenses, with availability dependent on local regulatory approval. Initial offerings are heavily sports-centric—covering game results, player performance, and season-long outcomes—with the potential to expand into adjacent categories over time as regulations allow. Because the product sits within DraftKings’ broader sportsbook ecosystem, it is regulated at the state level rather than federally, meaning its scope and structure vary by jurisdiction and remain subject to ongoing scrutiny from state gaming regulators.

FanDuel Prediction Markets

FanDuel Prediction Markets is FanDuel’s approach to outcome-based markets, enabling users to trade on the probability of specific sports and event outcomes using FanDuel’s established sportsbook platform. Backed by Flutter Entertainment, FanDuel relies on its proprietary pricing models, trading tools, and large user base to create liquid, fast-moving markets that closely mirror traditional betting lines while framing participation around prediction and market dynamics.

FanDuel’s prediction offerings are available in select U.S. states where FanDuel is licensed to operate, with market access governed by individual state gambling laws. The platform currently focuses on sports-related outcomes, though future expansion could include broader event categories depending on regulatory clarity. Like DraftKings, FanDuel operates under state-by-state gaming oversight rather than a federal derivatives framework, placing its prediction markets squarely within the evolving debate over where sports betting ends and prediction markets begin.

Crypto.com Sports

Crypto.com’s event-based sports contracts are marketed as legal in all 50 states under federal derivatives rules. Like Kalshi, the platform is structured as a financial marketplace, theoretically allowing nationwide participation. To participate in these contracts and potentially win payouts, users must have a certain amount of money paid or staked. However, regulatory uncertainty persists, especially regarding sports-focused markets in states with strict gaming laws.

PredictIt

PredictIt is one of the longest-running U.S. political prediction markets. It operates under a CFTC-approved designation as a contract market and is widely considered legal across all 50 states. PredictIt focuses on political and economic events rather than traditional sports or entertainment, which simplifies its regulatory compliance.

ForecastEx

ForecastEx offers a platform where users can trade prediction contracts through one of its regulated members. According to available information, this allows ForecastEx to legally operate in all 50 states. Like other federally regulated platforms, individual states may still have restrictions on specific contract types.

Robinhood Prediction Markets

Robinhood’s prediction market offerings, powered through Kalshi, claim access in all 50 states. Users can trade contracts on politics, economics, and other non-sports events. Legal challenges remain possible, particularly in states with restrictive gambling or sports betting laws.

Current legal battles & regulatory issues

While many prediction‑market platforms claim broad U.S. coverage, the legal landscape is far from settled. A growing number of states are challenging platforms, especially those offering sports event contracts, arguing that these markets fall under state gambling laws rather than being purely financial instruments. Below are some of the key legal battles and state-level flashpoints today.

Kalshi vs. state regulators

Kalshi is at the center of the most intense legal fights. Although the company argues its contracts are derivatives regulated by the Commodity Futures Trading Commission (CFTC), several states strongly disagree.

• Nevada: The regulatory crackdown has advanced — a federal judge recently ruled that Kalshi is subject to Nevada gaming laws, lifting the earlier injunction that had shielded Kalshi.
• Maryland: A federal judge denied Kalshi’s request for a temporary restraining order or injunction against the state’s cease‑and‑desist. So far, Maryland’s regulators prevailed — though enforcement has been delayed pending appeal.
• Massachusetts: The state attorney general filed a lawsuit against Kalshi, arguing the company is offering unlicensed sports betting under the guise of “event contracts.”
• Ohio: Kalshi sued regulators after a directive from the state’s gaming commission to cease operations.

Below is a full list of states that have challenged Kalshi. We provide their status or current result:

Broader state & regulatory trends

These legal disputes are part of a larger battle over how prediction markets should be regulated in the U.S. States such as Arizona, Illinois, and Montana have joined in, issuing warnings or cease‑and‑desist letters to Kalshi and other prediction platforms.

This tension centers around a key issue: federal preemption. Kalshi and its backers argue that the Commodity Exchange Act gives the CFTC exclusive jurisdiction over its type of contract, making state-level gambling laws irrelevant. Several courts have sided with this view, but not all. As legal scholars note, the fight could reshape the entire regulatory structure for event contracts.

The regulatory environment for prediction markets was significantly influenced by the policies and enforcement actions of the Trump administration, which affected platforms like Kalshi and Polymarket.

In addition, dozens of states have filed amicus briefs or taken actions in support of stricter regulation, citing concerns over consumer protection, taxation, and the impact on licensed sportsbooks.

There are also tribal gaming regulators (under the Indian Gaming Regulatory Act) weighing in on whether event contracts should be treated as traditional wagers, adding another layer of complexity.

What this means for users

• Uncertain Availability: Even if a platform claims to operate in all 50 states, specific contracts (especially sports-related ones) may be restricted or subject to enforcement in states where legal battles are ongoing.
• Regulatory Risk: The outcome of these lawsuits could dramatically reshape which types of event contracts are allowed in certain states — and how they’re taxed or regulated.
• Platform Strategy: Kalshi’s aggressive litigation suggests it’s committed to defending its federal regulatory model. That could benefit users long-term, but also carries risk until courts fully settle the issue.
• Stay Informed: For users interested in playing prediction markets, tracking state-level litigation (especially in your home state) is becoming just as important as understanding market mechanics.
• Account Requirement: Users must create an account on prediction market platforms to access features such as placing bets, trading event contracts, and managing their investments.

Understanding availability and limitations

While many platforms claim nationwide access, there are several practical considerations:

• State-specific restrictions: Even federally regulated platforms may restrict certain contract types in individual states due to ongoing legal disputes.
• Contract-specific availability: Sports-related contracts are more likely to face state-level challenges than political or economic contracts.
• Platform terms of service: Users may encounter geo-blocking if they are in a state where regulatory approval has not yet been finalized. Additionally, many prediction markets operate on a peer-to-peer basis, allowing users to trade directly with other users rather than against the house.
• Regulatory changes: The legal landscape for prediction markets is evolving rapidly. Court cases, CFTC rulings, and state legislation can alter availability at short notice.

Why users should be cautious

Prediction markets offer exciting opportunities for trading on diverse events, but users must remain aware of legal and regulatory risks:

• Legal risk: Participating in a restricted state could put users at risk of legal penalties, though enforcement against individuals has historically been rare.
• Financial risk: Contracts often behave like derivatives. Losses are possible, and some contracts may have limited liquidity. Users should also be aware of how contracts pay out and the potential for paying transaction fees or other fees associated with trading.
• Tax implications: Winnings from prediction markets are generally considered ordinary income and must be reported to the IRS. State tax treatment may also apply, and any fees paid or other fees incurred may affect the net winnings reported for tax purposes.

Conclusion

Prediction markets are an innovative alternative to traditional sports betting, offering the potential for nationwide access and the ability to speculate on a wider range of events. Platforms like Kalshi, Crypto.com, and Robinhood claim coverage in all 50 states, while Underdog and Polymarket have more limited or pending availability.

Examples of prediction markets include trading on diverse event outcomes such as political outcomes, sports politics, gas prices, high temperature forecasts, the next meeting of the Federal Reserve, and major sporting events like the Super Bowl. A trader can take a position by buying an event contract, use a limit order to control their entry or exit price, and should be aware of the bid ask spread, which affects trading costs. Selling event contracts before the outcome is known allows users to exit early, realize profits, or cut losses.

While legal in many areas, regulatory challenges, state-specific restrictions, and evolving federal oversight mean that users should proceed cautiously. Checking a platform’s terms, reviewing state law, and understanding contract types is essential before participating.

The U.S. prediction market landscape is still young, but it continues to expand. Users who follow legal developments, stay informed about platform coverage, and understand the risks can safely explore these exciting new markets.