Are Prediction Markets Legal? Where Kalshi and Polymarket Stand in the US
The short answer, the long answer, and a state-by-state table. Updated as the courts move, because they are moving fast.
Last verified: July 12, 2026. The legal status of prediction markets changes monthly, sometimes weekly. Everything below was checked against primary sources and current reporting on the date above.
The short answer
Yes, prediction markets are legal in most of the United States, and the biggest platforms are regulated by the federal government. Kalshi is a Designated Contract Market regulated by the Commodity Futures Trading Commission, and Polymarket's US exchange operates under its own CFTC designation. You are trading contracts on a federally supervised exchange, the same category of oversight that covers commodity futures.
Now the honest part: a group of states disagrees, loudly, and they are fighting it out in federal court right now. More than a dozen states have issued cease-and-desist orders, filed lawsuits, or moved to block sports contracts specifically. The platforms have won some of those fights and lost others. If you live in one of the contested states listed below, what you can trade may change with the next ruling.
So the real answer has three layers:
- Federally: regulated and operating. No federal agency is trying to shut these platforms down; the CFTC is actively defending them in court.
- In most states: available with no active challenge.
- In the contested states: it depends on the platform, the contract type (sports is the flashpoint), and whichever court ruled most recently. Details in the table below.
What a prediction market is, legally speaking
A prediction market lets you buy and sell contracts on the outcome of real events. Each contract settles at $1 if the event happens and $0 if it does not, and it trades in between at a price that works out to the market's implied probability. If that mechanic is new to you, start with how prediction markets work and come back; this article is about the legal layer.
The legal identity of these platforms comes from one designation. Kalshi applied to the CFTC and was approved as a Designated Contract Market, or DCM, in 2020. A DCM is a federally regulated exchange, overseen under the same framework that governs commodity futures trading. DCMs can list "event contracts" under the Commodity Exchange Act, and they self-certify new contracts as compliant with the Act and with CFTC regulations.
Polymarket got to the same place by a different road. Its main global platform spent years walled off from US users after a 2022 CFTC enforcement action. In July 2025 it bought QCX, a CFTC-licensed exchange, along with a licensed clearinghouse, for $112 million, and in November 2025 the CFTC issued an Amended Order of Designation that let Polymarket US open as a fully regulated exchange. The full story of each platform is its own article: Is Kalshi legal? and Is Polymarket legal?
Why does the designation matter so much? Because the Commodity Exchange Act gives the CFTC exclusive jurisdiction over certain contracts traded on a DCM. Exclusive is the key word. The platforms' entire legal position rests on it: if a sports outcome contract on a DCM is a "swap" under federal law, then federal law occupies the field and states cannot regulate it as gambling. A federal appeals court endorsed exactly that reading in April 2026, which we will get to.
Trading, not betting: the distinction the whole fight turns on
Here is the doctrinal heart of it, in plain English.
When you bet with a sportsbook, the book sets the odds, takes the other side of your wager, and profits from a built-in margin. That arrangement is gambling in every legal sense, which is why sportsbooks need state gaming licenses and operate only in states that allow them.
On a prediction market, there is no house. You buy a contract from another trader who disagrees with you about the price, on an exchange that just matches orders and charges a fee, the way a stock exchange does. You can sell that contract at any moment there is a buyer. Functionally it is a two-sided market in a financial instrument whose value happens to derive from a future event. That is the definition of a derivative, and derivatives on regulated exchanges are federal territory.
The platforms' argument, accepted so far by some courts and rejected by others, is that these contracts are swaps under the Commodity Exchange Act, full stop, and that a state calling them "bets" does not change what they are. The states' argument is the mirror image: putting a market price on a game outcome is still wagering on a game, and states have regulated gambling since before the CFTC existed. One federal appellate judge, dissenting from the biggest platform win so far, called the trading framing "acts of alchemy" that try to "transmute" sports gambling into futures trading. That phrase is the entire dispute.
Both sides are making serious arguments, and the next two sections cover who is winning.
The scoreboard: what courts have actually decided
Sports contracts launched on Kalshi in January 2025, and within months a wave of state gaming regulators sent cease-and-desist letters. The litigation that followed has produced a genuinely split scoreboard. The major rulings, in order:
Maryland, August 2025. A federal court denied Kalshi's request for an injunction, holding that Congress did not clearly intend to displace state authority over gambling. The first significant platform loss. The case is on appeal to the Fourth Circuit, which heard oral arguments in May 2026.
Nevada, late 2025 into 2026. Kalshi initially won an injunction, but the Ninth Circuit upheld an order dissolving it, clearing the way for state enforcement. Nevada's Gaming Control Board then went to state court and got orders against both Kalshi and Polymarket. Those cases are on appeal to the Ninth Circuit, which heard consolidated arguments in April 2026 involving Kalshi, Robinhood, and Crypto.com.
Massachusetts, early 2026. A Suffolk County Superior Court judge sided with the Attorney General and granted a preliminary injunction, effective January 23, 2026, barring Kalshi's sports event contracts in the state, rejecting the swaps argument as "overly broad." Kalshi's appeal went on direct review to the Supreme Judicial Court, the state's highest court, which heard oral argument in May 2026 and has not ruled as of the verification date. Kalshi's non-sports markets still operate in Massachusetts.
The Third Circuit, April 2026: the platforms' biggest win. The first federal appellate ruling on the merits question. A divided panel affirmed Kalshi's injunction against New Jersey, holding that sports event contracts are swaps under the Commodity Exchange Act and that the Act preempts state regulation of those contracts on a CFTC-registered DCM, on both field and conflict preemption grounds. Judge Roth dissented (she is the "alchemy" judge). Within the Third Circuit's territory, that is currently the law while the case proceeds.
Michigan, June 30, 2026. A state judge temporarily blocked Kalshi's sports contracts while the Attorney General's lawsuit proceeds. Kalshi is complying with the shutdown order.
New York, July 2026: the newest platform loss. On July 7, a federal judge in the Southern District of New York denied Kalshi's request for an injunction against state gambling enforcement, breaking with the Third Circuit's reasoning. Kalshi appealed to the Second Circuit the same day. If the Second Circuit disagrees with the Third, that is a circuit split, and circuit splits are how cases reach the Supreme Court.
Minnesota: the outright ban. Minnesota passed a law banning prediction market platforms entirely, with felony provisions, effective August 1, 2026. The CFTC itself sued Minnesota in May seeking to block the law.
Where does that leave things? Roughly here: one federal appeals court has squarely backed the platforms, one federal district court in New York has squarely backed the states, Maryland and Massachusetts courts lean toward the states, several other federal courts have paused state enforcement while they decide, and appeals are pending in multiple circuits across the country. Most observers, on both sides, expect this to end at the Supreme Court.
The federal regulator is in the fight, on the platforms' side
Two developments in 2026 tell you where the CFTC stands.
First, it stopped being a bystander. The CFTC has filed its own lawsuits and interventions against states that moved to block prediction markets, including actions involving Arizona, Connecticut, Illinois, Minnesota, and Rhode Island, arguing that federal law preempts state enforcement against contracts on its regulated exchanges. A federal regulator suing states to protect the platforms it regulates is a strong signal of the federal posture.
Second, it started writing real rules. On June 10, 2026, the CFTC issued a proposed rulemaking that would formally define which event contracts are permitted. The proposal would allow sports contracts on outcomes like final scores, point differentials, win-loss results, tournament advancement, and statistical performance, while prohibiting contracts on player injuries, officiating decisions, single discrete plays, fights, and youth sports. The comment period closes July 27, 2026.
Read those two moves together and the direction is clear: the federal government is not trying to shut prediction markets down. It is trying to formalize them, with guardrails. That does not resolve the state fights, but it removes the scenario where the CFTC itself pulls the plug.
State-by-state status
Two things before the table. First, "contested" does not mean "you will be arrested." Every enforcement action so far has targeted the platforms, not their users; we found no case of an individual trader being prosecuted for using Kalshi or Polymarket. Second, in most contested states the platforms remain live while appeals play out. The practical question is usually whether sports contracts are available where you live, not whether you are breaking the law by holding positions.
Status as of July 12, 2026:
| State | What is happening | Practical status |
|---|---|---|
| Arizona | State pursued criminal charges over sports and election contracts; a federal judge permanently blocked them and the CFTC won a restraining order against the state | Platforms live |
| California | Tribal lawsuit under the Indian Gaming Regulatory Act; injunction denied, on appeal to the Ninth Circuit | Platforms live, litigation pending |
| Connecticut | Cease-and-desist orders issued December 2025; CFTC sued the state in April 2026, suit pending, no injunction either way | Platforms live, contested |
| Illinois | Gaming Board cease-and-desist orders since April 2025; CFTC suit against the state pending, no injunction either way; Kalshi separately suing over the state's new prediction-market tax | Platforms live, contested |
| Maryland | Kalshi lost its injunction bid; Fourth Circuit appeal argued May 2026 | Contested, watch the appeal |
| Massachusetts | Superior Court injunction bars Kalshi's sports contracts; SJC heard argument May 2026, ruling pending | Kalshi sports contracts blocked pending the SJC ruling |
| Michigan | Court-ordered temporary shutdown of Kalshi's sports contracts, June 30, 2026 | Kalshi sports contracts paused |
| Minnesota | Statewide ban with felony provisions effective August 1, 2026; CFTC suing to block it | Ban imminent unless enjoined |
| Nevada | State court orders against both platforms; Ninth Circuit appeal argued April 2026 | Sports contracts blocked on both platforms |
| New York | Federal judge sided with the state July 2026; Kalshi appealed to the Second Circuit | Contested, changing fast |
| Ohio | $5 million fine against Kalshi over tax and age-verification claims; Sixth Circuit appeal with CFTC support | Platforms live, contested |
| Rhode Island | State sued both platforms in May 2026; CFTC countersued | Platforms live, litigation early |
| Tennessee | CFTC won an injunction blocking state enforcement; state appealed | Platforms live |
| Texas | Legislative investigation, recommendations due 2027 | Platforms live |
| Utah | State officials hostile; Kalshi sued preemptively | Platforms live, litigation early |
| Washington | State enforcement attempted; platforms denied emergency relief but state action also stalled | Live but unsettled |
| Wisconsin | Three AG lawsuits plus a tribal suit against Kalshi; CFTC countersued | Platforms live, contested |
| All other states | No major pending restriction | Platforms live |
If your state is not in the table, there is no significant pending legal challenge there as of the verification date. If it is, check the platform's own availability notice before trading; the platforms geofence restricted states, so what you see in the app reflects the current ruling.
Kalshi and Polymarket are not in identical positions
The two platforms end up in the same fights but arrived with different histories, and the differences matter if you are choosing where to trade.
Kalshi has been a CFTC-designated exchange since 2020, sought regulatory clearance first on both election and sports contracts, and is the named defendant or plaintiff in most of the state litigation above. Polymarket spent 2022 through 2025 as an offshore platform closed to US users, then re-entered through the acquisition of an already-licensed exchange. Its US product is newer, and some state actions name only Kalshi because Kalshi got there first. The state-by-state details for each are in the split guides: Is Kalshi legal? and Is Polymarket legal?
Outside the US
This article is about US law. Elsewhere, the picture inverts: Polymarket's global platform serves much of the world but excludes the US (US users trade on the separate Polymarket US exchange) and several other countries, while Kalshi is US-focused. If you are outside the US, your country's own gambling and financial regulations control, and several countries restrict these platforms outright. Check locally; international status is beyond this guide's scope.
Common questions
Is trading on a prediction market gambling? Legally, that is precisely the question the courts are split on. Practically: you are trading a financial contract on a regulated exchange, with the freedom to exit at any time that a locked-in wager never gives you. Our view of the mechanics is in prediction markets vs sportsbooks.
How old do I have to be? 18 on the exchanges, in most states, compared with 21 at most sportsbooks, though regulators and the major sports leagues have pushed to raise the age for sports contracts to 21, so this could change.
Can I get in trouble for trading in a contested state? Enforcement has been aimed at platforms, not users. If a state wins, the practical result so far has been the platform pausing those contracts there, not user prosecutions. Not legal advice; if you have real exposure, ask a lawyer in your state.
What happens to my open positions if my state restricts trading? In shutdowns so far, platforms have geofenced new activity while letting users close or settle existing positions, but the mechanics are platform-specific and evolving. Some traders close positions ahead of known ruling dates for exactly that reason.
Do I owe taxes on profits? Yes, trading profits are taxable income. How they are characterized is between you and your tax professional; this is not tax advice.
The bottom line
Prediction markets are federally regulated, live in most of the country, and backed in court by their own regulator. They are also the subject of the most active gambling-law fight in America, with real losses in New York, Maryland, Massachusetts, Nevada, and Michigan sitting alongside the platforms' landmark win in the Third Circuit. Nothing about that fight stops you from trading where the platforms operate today. It does mean the map can change under you, which is why this page carries a verification date and gets updated when the courts move.
Related reading: Is Kalshi legal? · Is Polymarket legal? · How prediction markets work · Prediction markets vs sportsbooks
This article is educational information about the law as of the date above. It is not legal, financial, or tax advice. Prediction markets involve risk of loss, and their legal status varies by location and changes over time. Verify current status where you live before trading.