How Are Prediction Markets Regulated in the US?

Are Prediction Markets Legal? Breaking Down Prediction Market Regulations

To understand how prediction markets are able to provide their services to users, it’s necessary to briefly outline how they work. Prediction markets allow users to buy and sell Yes/No contracts on real life events. Each contract has a price between $0.01 and $0.99 based on how likely it is to occur. In the table below, we’ve outlined an example of how this would work:

If the Bills go on to win, each ‘Yes’ share would settle at $1 each. This would give you a profit of $1-$0.65=$0.35 on each share. If the Bills did not win, each contract would be worth $0, meaning you lose your money.

Prediction Market Pricing

Prediction exchanges don’t set their own prices for trades. Instead, these are 100% driven by the market, influenced by other traders and external events. Sites such as Kalshi charge users a small fee to facilitate a trade but have no stake in the outcome. This model puts prediction sites into the category of financial exchanges, overseen by the CFTC (Commodity Futures Trading Commission) - the government body which has regulated this sector since 1974 and ultimately reports to Congress.

Pros and Cons of Prediction Market Sites

One of the best bits about prediction markets is the massive choice of event contracts, but there are several other pros you should consider:

Pros and Cons

• Easy to use setup
• Community feel
• Compliant with CFTC regulations
• Emphasis on safety

• Learning curve for new traders

How Do Prediction Market Regulations Keep Members Safe?

As CFTC regulated sites, the brands we recommend are required to meet strict criteria to protect members. This includes:

Detailed Trade Information

Prediction markets publish information on each trade including its current value and the method of resolution. For example, a news outlet could detail the final score of a sports event. Knowing this information before making a trade helps members to judge how changes in the market could impact prices.

Anti-Money Laundering Requirements

Regulated prediction markets are subject to the Bank Secrecy Act and other legislation, which means they must follow strict anti-money laundering requirements. These are usually set by the individual prediction market as part of the wider framework and include reporting any suspicious activity or transactions.

KYC Verification

Accessing prediction markets is strictly an adult activity so any prospective users are required to complete KYC (Know Your Customer_ verification. To meet these conditions, members must provide certain pieces of information and evidence. This could include a copy of an ID document, such as a passport, as well as your Social Security Number and a selfie. This requirement ensures that only adults are able to register and make trades.

Restrictions on Trades

Any members with inside information on event contracts are forbidden from trading. That includes athletes or people associated with a particular sporting event, employees at companies being traded or anyone involved with political event outcomes. Doing so would mean that you are removed from the prediction market.

Staying Safe at Prediction Markets - Top Tips for an Enjoyable Experience

Now that you’re clear on prediction market legality, it’s possible to check out some of the finest examples of prediction markets out there. We’ve added links to the leading sites in the industry on this page but, before you join, gen up on our top tips for staying safe:

Will Prediction Market Regulations Change in the Future?

Prediction market regulations can be complex depending. They’re also subject to changes as the legal landscape alters. There have been several challenges issued against prediction markets in some states; however, a very recent series of legal actions by the CFTC has resulted in a formal document of proposed rules regarding prediction markets. These proposed rules would clearly outline which markets are and aren’t available for trades and will allow all eligible members to sign up and trade at the top prediction market sites.

Verdict - Be Clear on Prediction Market Regulations Before You Join

With a chance to trade on everything from the next winner of the NBA to the new resident of the White House, prediction markets are an interesting option for folks in the US. Provided you’re over the age of 18, you’ll be able to sign up at all of the regulated sites on our pages. They operate as a CFTC regulated market which is allowed at a federal level.

Several states have challenged the arrival of prediction markets but a new ruling from the CFTC could see official rules emerge about the nationwide place of prediction markets. We’ll keep this page fully updated as any new legislation emerges but for now you can use our links to explore the best prediction market options.

The Sports Predictions Platforms We Vouch for

Prediction Market Regulations FAQ

Trade Responsibly

Prediction markets involve financial risk, and outcomes are never guaranteed. In light of this, trading should always be controlled and enjoyable. Keep your activity in check by following responsible trading practices such as:

Set a Budget:

Only trade money you can afford to lose and stop when your budget is reached.

Don't Chase Losses:

Avoid increasing trade size or frequency to recover losses.

Trade with a Clear Head:

Don't trade when stressed, tired, emotional, or under the influence.

Set Time Limits:

Take breaks and avoid letting trading interfere with daily life.

Know Your Stuff:

Learn how contracts, pricing, fees, and settlement work before trading.

Use Platform Controls:

Use spending limits, account history, or self-exclusion tools where available.

For guidance on responsible trading and risk awareness, the following free official resources are available:

SEC OIEA

FINRA

To make sure you get accurate and helpful information, this guide has been edited by Ryan Leaver as part of our fact-checking process.