The legal status of prediction markets in the United States is one of the most frequently misunderstood subjects in the space. The two questions readers usually want answered are whether Polymarket is legal for a U.S. resident, and whether Kalshi is a legitimate alternative. The short answers are no and yes, respectively, but the longer answers are where the practical information lives. This article walks through the regulatory framework, the relevant enforcement history, and the options available to a U.S. resident today. It is a plain-English summary and not legal advice. Anyone wagering meaningful capital should consult counsel licensed in their jurisdiction.
The regulatory framework, briefly
In the United States, event contracts that pay out based on a future occurrence are regulated by the Commodity Futures Trading Commission, or CFTC. The CFTC is the federal agency with statutory authority over derivatives markets, and event contracts fall within its jurisdiction under the Commodity Exchange Act. State gambling regulators may also have a secondary interest depending on how a given contract is structured, but the primary federal regulator for prediction-market activity is the CFTC.
A platform that wants to legally offer event contracts to U.S. residents must register with the CFTC as a designated contract market, or DCM, and submit each contract it lists for review. The DCM framework imposes obligations on capital adequacy, customer fund segregation, surveillance, and clearing. It is the same framework that governs futures exchanges like the CME. Operating an event-contract platform for U.S. customers without DCM registration is unlawful.
Kalshi: a CFTC-regulated designated contract market
Kalshi is the only prediction-market venue of meaningful scale that is registered with the CFTC as a designated contract market. The platform received its DCM designation in 2020 after a multi-year application process. Customer funds on Kalshi are held at FDIC-insured banks, contracts clear through a regulated derivatives clearing organization, and the platform is supervised by the same federal regulator that oversees the broader U.S. derivatives industry.
The practical consequence is that Kalshi is fully legal for any U.S. resident who is at least 18 years old, in any of the 50 states. There are no geographic restrictions at the federal level, although Kalshi enforces its own internal rules on which markets are visible to which customers based on KYC verification. Identity verification at signup is mandatory, in line with anti-money-laundering requirements that apply to any U.S. financial institution.
Some specific Kalshi markets have been the subject of litigation. The most prominent example was the company's 2024 dispute with the CFTC over election event contracts, which Kalshi ultimately won in federal court. That litigation cleared the way for Kalshi to offer regulated election markets to U.S. customers, a category that had previously been off-limits at the federal level. The ruling did not extend to offshore or unregistered platforms.
Polymarket: restricted by consent order, evolving
Polymarket operates on the Polygon blockchain and settles trades in USDC, a dollar-pegged stablecoin. The platform is not registered with the CFTC. In January 2022, Polymarket entered into a consent order with the CFTC under which it agreed to a $1.4 million civil penalty and committed to restrict U.S. residents from accessing the platform. That consent order remains the governing document for Polymarket's U.S. posture.
In the years since, the company has taken a series of steps that suggest an eventual U.S. re-entry. In 2024 the platform raised additional capital and publicly signaled an intent to return to the U.S. market through a regulated pathway. Senior CFTC officials have made public comments suggesting an openness to bringing more event-contract activity under federal oversight rather than driving it offshore. As of the publication date of this article, Polymarket remains unavailable to U.S. residents under the original 2022 consent order.
A U.S. resident who accesses Polymarket through a virtual private network or other circumvention tool is violating the platform's terms of service and is exposed to the same legal risk that applies to any unlicensed derivatives activity. Funds wagered on Polymarket from the United States cannot be reliably recovered if the account is flagged and frozen. The practical recommendation for U.S. residents who want exposure to prediction markets is to use Kalshi until Polymarket re-enters through a regulated channel.
State-level considerations
Although event contracts are federally regulated, a small number of states have asserted additional authority. Most of these challenges have been settled in favor of federal preemption, but several states have at various points attempted to block Kalshi from offering specific contracts. As of writing, no state has successfully blocked a CFTC-approved event contract from being offered to its residents. The litigation history is instructive but the binding answer for now is that federal regulation governs.
Tribal gaming compacts and state lottery laws can create gray areas around contracts that resemble sports wagers. Kalshi has navigated this by listing sports-event contracts under the CFTC framework rather than state gaming frameworks, on the theory that an event contract paid in dollars to a registered DCM customer is not a sports wager in the state-law sense. The legal theory has held up in court but readers in states with active sports betting regulation should pay attention to ongoing developments.
Election event contracts
Election event contracts deserve their own section because the legal status changed materially in 2024. Until that year, election contracts had been functionally unavailable on regulated U.S. venues because the CFTC declined to approve them. Kalshi sued the CFTC, arguing that the commission lacked statutory authority to block contracts that did not involve "gaming" within the meaning of the Commodity Exchange Act. The District Court for the District of Columbia agreed, and the D.C. Circuit upheld the ruling on appeal. Kalshi began offering U.S. election contracts in October 2024.
Polymarket also operates active election markets, with substantially deeper liquidity than the regulated U.S. venue, but those markets are not legally available to U.S. residents under the consent order described above. The disparity in liquidity between the two platforms on the same questions is meaningful, but it does not change the legal answer for a U.S. resident.
Tax treatment
Profits from event contracts traded on a CFTC-registered venue are generally treated as short-term capital gains for U.S. tax purposes, taxed at the trader's ordinary income rate. Kalshi issues tax forms summarizing customer activity. Losses are deductible against gains in the normal manner. Tax treatment of trades on unregistered offshore platforms is murkier and is one of several reasons to avoid them; the practical reality is that unreported income from any source remains a tax obligation, but documenting it cleanly is harder.
International users
Non-U.S. residents face a different and generally more permissive landscape. Polymarket accepts users from most jurisdictions outside the United States, with country-level exclusions for sanctioned jurisdictions and a short list of countries that have their own restrictions on stablecoin activity. Local laws vary considerably; users in the European Union, the United Kingdom, Canada, and Australia should consult local guidance on whether prediction-market activity is taxable, reportable, or regulated in their jurisdiction.
The bottom line for a U.S. resident
Kalshi is legal, regulated, and available in all 50 states. It is the only domestic option of meaningful scale and is the correct platform for a U.S. resident who wants to participate in prediction markets through a federally regulated venue. Polymarket is not legally available to U.S. residents at this time. The platform offers deeper liquidity in some categories, particularly long-dated political and crypto markets, but the legal and counterparty risks of accessing it from the United States outweigh the liquidity advantage for almost all retail users.
Frequently asked questions
Is Polymarket legal in the United States in 2026?
No. Polymarket remains subject to the 2022 CFTC consent order that restricts U.S. residents from using the platform. The company has publicly signaled an intent to re-enter the U.S. market through a regulated channel, but as of the publication date of this article no such re-entry has occurred.
Is Kalshi legal in all 50 states?
Yes. Kalshi is a CFTC-registered designated contract market and is available to U.S. residents over the age of 18 in all 50 states. Some state regulators have challenged specific contract listings, but no state has successfully prevented a CFTC-approved contract from being offered to its residents.
Can I use a VPN to access Polymarket from the United States?
Using a VPN to access Polymarket from the United States violates the platform's terms of service and is inconsistent with the consent order Polymarket entered with the CFTC. Funds wagered through such access can be frozen if the account is flagged, and the legal exposure falls on the user, not the platform. The practical recommendation is to use Kalshi instead.
Are prediction-market winnings taxable?
Yes. Profits from event contracts traded on a regulated venue are generally taxed as short-term capital gains at the trader's ordinary income rate. Kalshi issues tax documentation summarizing customer activity. Losses can be deducted against gains. Tax treatment for offshore or unregistered platforms is more complicated and should be reviewed with a tax professional.
Will Polymarket return to the United States?
The company has indicated publicly that it intends to. A return would require either CFTC registration as a designated contract market, acquisition of an existing DCM, or a structural change to the platform that places it outside the CFTC's event-contract jurisdiction. Any of these paths is plausible; none has been confirmed as of this article's publication date.
Are election markets legal on Kalshi?
Yes, as of October 2024. Kalshi prevailed in federal litigation against the CFTC and is now offering regulated U.S. election event contracts. The legal status of these contracts is settled at the federal appellate level within the D.C. Circuit, although future legislative or regulatory changes could alter the picture.