Are Prediction Markets Legal in the US? The Complete 2026 Answer
The short answer is yes — prediction markets are legal for US residents when using CFTC-regulated platforms. The longer answer involves an ongoing battle between federal and state authority that may ultimately reach the Supreme Court.
The Federal Framework
Platforms like Kalshi operate as CFTC-regulated Designated Contract Markets under the Commodity Exchange Act. Event contracts are classified as derivatives — financial instruments tied to the outcome of real-world events. Under this framework, federal law governs the platforms and state gambling laws do not apply.
The State Challenge
Since the repeal of PASPA in 2018, states have controlled sports betting regulation within their borders. More than 10 states have issued cease-and-desist orders to prediction market operators, arguing that sports event contracts constitute unlicensed gambling. Seven states were engaged in active federal litigation as of early 2026.
The CFTC Position
In January 2026, newly appointed CFTC Chair Michael Selig ordered staff to draft a formal rulebook for prediction markets and withdrew previous advisories that had cautioned against sports-related contracts. Selig stated the CFTC would not allow state governments to undermine its exclusive jurisdiction over these markets.
What This Means for Traders
For users on CFTC-regulated platforms like Kalshi, DraftKings Predictions, FanDuel Predicts, Robinhood, and Fanatics Markets, the current legal position is that you are trading on federally regulated financial products. The platforms bear the regulatory risk, not individual traders.
The Supreme Court Outlook
Legal experts anticipate Supreme Court involvement between 2027 and 2028, contingent on a circuit split emerging from federal appeals courts. Until then, the CFTC's permissive stance allows platforms to continue operating. The most significant risk scenario is a ruling that sports contracts specifically fall under state jurisdiction, which analysts estimate could reduce trading volumes by up to 80%.
Our Recommendation
Stick to CFTC-regulated platforms listed in our rankings. Avoid any platform that is not registered with the CFTC as a Designated Contract Market or operating through one.