Prediction Markets Regulation 2026-2027: Global Legal Landscape, Court Battles, and Where the Industry Is Heading

Prediction markets regulation is the most unsettled topic in financial services right now. In the US the CFTC claims exclusive jurisdiction and in October 2026 wrote sports event contracts into its swap rules, yet three federal appeals courts have split on whether states can still enforce their gambling laws, and New Jersey has asked the Supreme Court to settle it. The UK treats prediction markets as betting under the Gambling Commission. France, Germany, the Netherlands, Belgium, Portugal, Italy, Poland, and several others have explicitly banned the major platforms. Australia has blocked access through ISPs, New Zealand told Kalshi and Polymarket to withdraw in February 2026, and India and Argentina have blocked Polymarket. This guide was last fact-checked in late October 2026.

This guide explains how prediction markets are currently regulated across major jurisdictions, why the legal classification is genuinely contested, what the ongoing court battles mean for the industry, and where regulation is likely to go over the next 18 months. Written for operators, investors, and industry professionals who need to understand the landscape rather than a consumer-style legal Q&A. For a broader industry overview, see our prediction markets guide. For the foundational basics of how these platforms work, start with what are prediction markets.

The Core Regulatory Question

The fundamental debate in prediction markets regulation comes down to a single question: are these financial instruments or gambling products?

The answer has enormous consequences. Financial instruments get regulated by securities and commodities authorities, usually at the federal or supranational level, with frameworks built around market integrity, disclosure, and investor protection. Gambling products get regulated by gaming commissions at the state or national level, with frameworks built around consumer protection, problem gambling, and integrity monitoring.

Prediction markets have structural features of both. They use exchange-based order books like financial markets. They let participants speculate on event outcomes like sportsbooks. The prices reflect probability like derivatives. The contracts resolve to a fixed payout like fixed-odds bets. Reasonable regulators looking at the same product can reach opposite conclusions, and in 2026 they consistently do.

The US has chosen the financial instrument path at the federal level, with the CFTC claiming exclusive jurisdiction. Most of Europe, Australia, and New Zealand have chosen the gambling path. That divergence is not temporary. It reflects genuine disagreement about how to classify a product that was not contemplated when the relevant legal frameworks were written.

United States: Federal Authority vs State Enforcement

The US regulatory picture is the most consequential and the most complicated. Understanding it requires tracking three parallel tracks at once: federal CFTC authority, state-level enforcement actions, and federal court rulings on which one prevails.

The federal framework

Kalshi holds a Designated Contract Market license from the Commodity Futures Trading Commission, granted in 2020. That license lets Kalshi self-certify event contracts under the Commodity Exchange Act, with the CFTC retaining authority to review and prohibit contracts that fall under a specific “gaming” prohibition rule. Polymarket US operates through QCX, a CFTC-registered exchange Polymarket acquired in 2025; the US product relaunched in December 2025 and dropped its waitlist in May 2026.

The CFTC under Chairman Michael Selig has taken an aggressive pro-prediction-markets stance. Selig has asserted the agency has “exclusive jurisdiction” over DCM-registered prediction markets, withdrew a 2024 proposal to ban event contracts, and rescinded a 2025 advisory warning firms about offering these products. On April 2, 2026, the CFTC took the unusual step of suing Arizona, Connecticut, and Illinois, arguing that the Commodity Exchange Act preempts those states’ gambling laws as applied to event contracts, and it later added Minnesota, Wisconsin and New York. On October 9, 2026 it went further with two rules: an interim final rule, effective on publication, that excludes bets placed with state- or tribally-licensed sportsbooks and casinos from the definition of a swap, and a proposed rule that expressly includes sports, political, cultural and weather event contracts in it. The proposal was published in the Federal Register on October 19 with a 30-day comment period. In effect, the CFTC is drawing the line itself: licensed sportsbook bets are gambling, exchange-traded event contracts are swaps.

State enforcement actions

Multiple states have disagreed. They argue that sports event contracts constitute gambling under their state laws regardless of federal commodities registration, and they have taken enforcement action accordingly.

The most significant state actions as of late October 2026:

• Massachusetts: First state to go on offense. A Suffolk County Superior Court judge enjoined Kalshi’s sports contracts on January 20, 2026, but the Appeals Court stayed the injunction on February 17 and the Supreme Judicial Court heard argument on May 4. No decision yet, so Kalshi’s sports contracts remain live in the state
• Nevada: Kalshi is geoblocked under a Carson City state-court order. After a TRO in March and a broader order in May, Kalshi agreed in July to geofence sports, election and entertainment contracts by August 12. The Ninth Circuit then ruled for Nevada on August 28 (see below), and Polymarket was hit with its own injunction on May 29
• New Jersey: Kalshi won in district court and in the Third Circuit on April 6, 2026. New Jersey has petitioned the Supreme Court (No. 26-299)
• Maryland: The district court denied Kalshi’s injunction; the Fourth Circuit heard the appeal in May 2026 and has not ruled
• Arizona: The Attorney General filed 20 misdemeanor counts against Kalshi on March 17, 2026. A federal judge then sided with the CFTC, issuing a TRO on April 10 and a preliminary injunction on May 5 that bars state enforcement against contracts on CFTC-regulated exchanges; Arizona has appealed to the Ninth Circuit
• Michigan: A state court enjoined Kalshi’s sports contracts on September 1, 2026, with a USD 500,000-a-day penalty for breaches. Robinhood and Coinbase agreed to wind down sports contracts in the state in September and October
• Washington State: A King County court ordered Kalshi on August 13, 2026 to stop sports, election and other contracts and geofence the state by September 2
• New York: A federal judge denied Kalshi an injunction in July 2026, and the Attorney General sued Polymarket US on September 24
• Connecticut: Kalshi was denied an injunction in August 2026 and has appealed; Gemini and Webull withdrew after cease-and-desist orders
• Illinois: The opposite result: on October 2, 2026 a federal judge granted the CFTC, Kalshi and Coinbase a partial injunction against the state’s licensing and criminal provisions
• Ohio: Fined Kalshi USD 5 million in April 2026 and sent cease-and-desist letters to ten platforms in October, telling licensed sportsbooks to stop supporting unlicensed contracts by October 30
• Minnesota, Wisconsin, Utah: A federal judge blocked Minnesota’s new felony ban before it took effect on August 1; Wisconsin’s federal court refused the CFTC an injunction in July; Utah won summary judgment against Kalshi in August and filed a further suit in October

The Third Circuit ruling and the path to the Supreme Court

On April 6, 2026, the US Court of Appeals for the Third Circuit issued the first federal appellate ruling on this question, in KalshiEX LLC v. Flaherty. The 2-1 decision, authored by Judge David Porter and joined by Chief Judge Michael Chagares, held that the Commodity Exchange Act preempts state gambling laws as applied to sports-related event contracts on CFTC-registered DCMs.

The reasoning: Kalshi’s sports event contracts qualify as “swaps” under the CEA, and the CEA’s comprehensive regulatory framework for designated contract markets creates field preemption that overrides state gambling classification. Put more simply, if the CFTC has not determined a contract is contrary to public interest, state regulators cannot override that implicit approval.

Judge Jane Roth dissented, describing Kalshi’s products as “virtually indistinguishable from the betting products available on online sportsbooks” and arguing that the presumption against preemption should apply with “special force” in the field of gambling regulation.

The split arrived over the summer. On August 28, 2026 the Ninth Circuit, in consolidated cases brought by Kalshi, Robinhood and Crypto.com against Nevada, held that sports event contracts are not swaps and that Nevada can enforce its gaming law; Kalshi has asked for rehearing en banc. On September 25 the Sixth Circuit reached the same result in the Ohio and Tennessee cases. New Jersey filed its petition for certiorari on September 2 (No. 26-299), Robinhood followed with its own petition against the Ninth Circuit ruling (No. 26-338), and amicus briefs backing review have come from 39 states plus DC, the NFL, the American Gaming Association, tribal groups and former CFTC chairman Gary Gensler. Kalshi’s response in the New Jersey case is due November 9, 2026, so the Court will not decide whether to take the case before December at the earliest.

Professional sports leagues enter the debate

In 2026, the NFL formally requested that prediction market operators remove contracts the league considers “objectionable bets,” including player-performance props, injury-related markets, and contracts that could create incentives for game manipulation. The NBA and MLB have made similar requests. The American Gaming Association filed an amicus brief in the Third Circuit case arguing that federal preemption of state gambling laws would undermine a decade of careful state-by-state regulatory development.

This is not just policy theater. Sports leagues have spent years building integrity-monitoring frameworks with licensed sportsbook operators, including real-time data sharing and suspicious activity reporting. If prediction markets operate outside that framework at scale, the leagues lose visibility into betting markets tied to their events.

Political markets and federal policy

Political event contracts got clearer in 2024 when a federal court ruled in Kalshi’s favor against the CFTC, holding that election-based contracts did not constitute illegal gambling under the CEA. The CFTC initially appealed but dropped the appeal after the Trump administration change in May 2025. Since then, political markets have operated without significant regulatory challenge.

Congress has produced more than ten prediction market bills since January 2026, running along three separate tracks. Senators Adam Schiff, John Curtis and Catherine Cortez Masto introduced the Prediction Markets Are Gambling Act (S.4160) on 23 March, which would amend the Commodity Exchange Act to bar CFTC-registered venues from listing sports and casino-style contracts; Representatives Horsford and Amodei filed a House companion. A second track targets insider trading by officials rather than the platforms: the Public Integrity in Financial Prediction Markets Act, led by Senator Elissa Slotkin with Senator Todd Young, and by Representative Ritchie Torres in the House. A third, from Senator Chris Murphy and Representative Greg Casar, would prohibit contracts on government actions, terrorism, war and assassination. None had passed or cleared committee as of October 2026.

United Kingdom: Clear Gambling Framework

The UK has taken the opposite approach to the US and resolved the regulatory question clearly in favor of gambling classification.

On February 4, 2026 the Gambling Commission set out its view in a published blog post rather than formal guidance: current prediction market products “would appear” to fall within the definition of a betting intermediary and are “akin to” a betting exchange such as Betfair, so they are unlikely to be able to classify themselves as anything other than gambling. The wording is careful, but the direction is clear, and nobody has seriously tried to argue the FCA route since.

Under this framework, any operator serving UK users must hold a Gambling Commission license, comply with consumer protection requirements, meet anti-money laundering obligations, and operate under UK gambling tax rules. Operators themselves pay gambling tax. Player profits remain tax-free (consistent with general UK betting taxation). This approach explicitly excludes FCA authorization as the regulatory path.

The commercial implications are significant. Polymarket and Kalshi cannot legally serve UK users: Polymarket lists Great Britain as close-only (existing positions can be closed, no new trades) and Kalshi lists the UK as a restricted jurisdiction in its member agreement. Only UK-licensed operators can offer prediction markets in Britain, and so far that means the exchanges:

• Matchbook: Launched a B2B prediction markets platform in December 2025 under its existing UKGC exchange licence. easyBet Predictions, part of easyJet founder Stelios Haji-Ioannou’s business group, went live on it in January 2026, and Matchbook is using the UK as a road test before a planned US entry
• Betfair Predicts: Invite-only beta since April 2026 and still not fully launched as of October. It is effectively a reskin of the Betfair Exchange, with prices shown as Yes/No percentages, classified as gambling under Betfair’s existing UKGC licence

The UK approach has one practical advantage. By treating prediction markets as betting intermediaries, the UK has avoided the federal-vs-state classification mess that is dominating US courts. The regulatory question was resolved in one regulator, with one framework, consistently applied.

European Union: Fragmented and Mostly Hostile

The EU has no unified regulatory framework for prediction markets. Gambling is regulated at the member state level rather than the EU level, which has produced a patchwork of national responses, overwhelmingly skeptical of the major platforms.

Countries that have explicitly banned or restricted prediction markets

As of late October 2026, the following European jurisdictions have taken enforcement action against Polymarket, Kalshi, or both:

• France: Polymarket geoblocked France itself in November 2024 after ANJ declared prediction markets illegal gambling services. On July 16, 2026 the ANJ went further and ordered ISPs to block the site; Polymarket filed a legal challenge in August
• Germany: The GGL publicly warned against Polymarket in September 2025 as illegal under the Interstate Treaty on Gambling, which only allows bets on events in an official programme. Polymarket geoblocks Germany
• Netherlands: The Kansspelautoriteit imposed a penalty order of EUR 420,000 per week (capped at EUR 840,000) with a February 17, 2026 deadline, declared EUR 420,000 forfeited and issued a collection order in May. Polymarket has objected and not paid
• Belgium: Gaming Commission blacklisted Polymarket on January 30, 2025
• Portugal: SRIJ ordered polymarket.com blocked on January 19, 2026, the day after the first round of the presidential election, citing the lack of a licence and the ban on betting on political events, after reports of heavy betting before results were known
• Italy: ADM ordered a block that took effect on July 27, 2026; an administrative court rejected Polymarket’s urgent appeal on August 4. Kalshi has also been added to ADM’s list of unauthorised operators
• Spain: DGOJ imposed a precautionary block on Polymarket and Kalshi, published on May 26, 2026, with disciplinary proceedings ongoing
• Denmark: A court ruled for Spillemyndigheden on July 8, 2026 and a DNS block went live on August 6
• Czech Republic: Polymarket added to the blocklist in July 2026, Kalshi on September 30, 2026
• Poland, Romania, Hungary: Poland listed Polymarket in January 2025, Romania blacklisted it in late October 2025, Hungary imposed a temporary block in January 2026
• Switzerland: Gespa blocklisted polymarket.com in November 2024 and added Polymarket guide sites in August 2026
• Ukraine: polymarket.com was added to the national register of prohibited sites, with the block in effect from January 2026; the gambling regulator, now called PlayCity, has confirmed it
• Turkey: The National Lottery Administration ordered a block on July 16, 2026

On June 18, 2026, nine national regulators (Belgium, France, Germany, Italy, the Netherlands, Poland, Portugal, Spain and Switzerland) issued a joint statement committing to coordinated action against unlicensed prediction markets during the World Cup. On July 3, ESMA added a financial-regulation angle: event contracts that qualify as financial instruments may fall under national bans on selling binary options to retail clients.

The pattern is clear. Where EU and adjacent member states have taken a position, the default answer has been “this is gambling, it needs a local license, the platform does not have one, block it.”

Gibraltar: First EU-adjacent licensed platform

On March 26, 2026, Gibraltar licensed Predict Street Ltd, the company behind ADI Predictstreet, as a betting intermediary under its gambling legislation, which local officials describe as the territory’s first prediction market licence and Europe’s first formally licensed prediction market operator. ADI Predictstreet launched globally around April 9, 2026, with a FIFA World Cup 2026 partnership, positioning itself as a licensed alternative to Polymarket in jurisdictions where Polymarket is blocked.

Gibraltar’s move matters because it shows a European regulator licensing prediction markets as betting rather than simply banning them. Malta has not set out its own approach.

The MiFID II question

The theoretical alternative to gambling regulation in the EU would be classifying prediction market contracts as financial instruments under MiFID II. This would place them under securities regulation with rules around market integrity, disclosure, and licensing of investment firms.

MiFID II does not provide an exhaustive definition of financial instruments but enumerates options, futures, swaps, forwards, contracts for differences, credit derivatives, and certain commodity contracts in Annex I Section C. Prediction market contracts whose underlying events are linked to financial or economic outcomes (interest rates, equity prices, commodity values) could plausibly fall under MiFID II as derivatives. Contracts on non-financial events like elections, sports, or cultural outcomes do not fit as cleanly.

No EU member state has formally adopted a MiFID II-based approach to prediction markets as of October 2026, although ESMA’s July 2026 statement on binary options shows the securities side is paying attention. Academic and legal commentary (particularly from Oxford Business Law Blog and firms like Taylor Wessing) suggests this is the likely long-term direction for financially-themed prediction markets, while event-based markets remain under gambling law. Practitioners expect this distinction to formalise over 2026-2027.

MiCA and crypto-based platforms

The EU’s Markets in Crypto-Assets (MiCA) regulation has applied in full since December 30, 2024, and the transitional period for existing Crypto-Asset Service Providers ended on July 1, 2026. Platforms like Polymarket settle in a stablecoin (USDC on Polygon), so the exchanges, custodians and on-ramps their EU users rely on now need MiCA authorisation, and an operator that itself exchanges or holds crypto for customers would need it too.

This creates another compliance layer on top of existing gambling restrictions. A prediction market operating in an EU member state would need both gambling authorisation (at the member state level) and MiCA compliance (at the EU level) if it uses crypto settlement.

Australia and New Zealand: Explicit Gambling Bans

Both Australia and New Zealand have taken firm positions classifying prediction markets as illegal gambling.

Australia: The Australian Communications and Media Authority (ACMA) determined in August 2025 that Polymarket constituted a “prohibited and unlicensed regulated interactive gambling service” under the Interactive Gambling Act 2001. ACMA directed internet service providers to block access to Polymarket domains and APIs. The trigger was a Crikey investigation that revealed Polymarket had paid Instagram and TikTok influencers to promote its Australian federal election markets. Between November 2024 and May 2025, Australians recorded over 1.88 million visits to Polymarket despite the platform’s nominal geoblocking.

ACMA’s reasoning explicitly rejected the financial instrument framing: “Australian users were not engaging with Polymarket to make financial decisions as defined under national law. Instead, the platform’s markets are better classified under gambling legislation.”

New Zealand: On February 16, 2026 the Department of Internal Affairs wrote to Kalshi and Polymarket, told them their products are gambling under the Gambling Act 2003 and the Racing Industry Act 2020, and asked both to withdraw. It came as New Zealand built its own capped online casino market of up to 15 licences under the Online Casino Gambling Act, in force since May 1, 2026. TAB holds a monopoly over online sports betting in New Zealand, and prediction markets compete directly with that monopoly, which partly motivated the hard-line regulatory position.

Unlike Australia, New Zealand does not ISP-block gambling websites, so enforcement relies on the platforms themselves. Polymarket now lists New Zealand as close-only.

Canada: Fragmented Provincial Approach

Canada regulates gambling at the provincial level, which has produced a patchwork similar to but smaller than the US state-level situation.

Ontario: The Ontario Securities Commission settled with Polymarket’s operators in April 2025 over breaches of its binary options ban: a C$200,000 penalty, C$25,000 in costs and a two-year market ban. Polymarket now lists Ontario, Quebec, British Columbia and Alberta as close-only, and Kalshi lists Canada as a restricted jurisdiction.

The first regulated route is coming through the securities side rather than gambling: Wealthsimple Predict, which offers Kalshi contracts to Canadians, was authorised by the investment industry regulator CIRO in March 2026 and announced in June. That makes Canada one of the few places where prediction markets are being treated as investment products rather than bets.

Asia: Mostly Restrictive

Singapore: The Gambling Regulatory Authority ordered Polymarket blocked from January 12, 2025 under the Remote Gambling Act.

Taiwan, Thailand: Polymarket geoblocks both. In Taiwan a district court ordered Kalshi and Coinbase blocked on October 15, 2026 over election betting.

South Korea: Blocked. The Korea Communications Standards Commission approved a block on Polymarket on August 18, 2026, after heavy trading on local elections; the Seoul mayoral market alone held about USD 43.5 million before the June vote.

India: Blocked. Polymarket’s site was blocked in May 2026, the same month India’s ban on real-money online games took effect, and its X account was withheld in India on October 22. Kalshi added India to its restricted list in June.

Philippines, Indonesia: PAGCOR endorsed Polymarket for blocking in May 2026 and Globe implemented it; Indonesia’s Komdigi blocked the site on May 22, 2026.

Japan, Hong Kong: No block. Polymarket restricts Japanese users on its website. Hong Kong’s investor education body warned in April 2026 that prediction markets may count as illegal gambling, and Japanese crypto exchange bitbank has warned it may restrict accounts used to fund Polymarket.

China: Both Polymarket and Kalshi are inaccessible without VPN circumvention. Polymarket has quietly begun targeting Chinese users despite the country’s strict gambling laws, hiring Mandarin speakers and listing bets tied to the Lunar New Year. Asia monthly trading volume on Polymarket reportedly reaches hundreds of millions of dollars.

Latin America: Closing Fast

Latin America was the most permissive region in 2025. That changed in 2026.

Brazil: Blocked. On April 24, 2026 the government blocked 27 platforms including Polymarket and Kalshi, and the National Monetary Council’s Resolution 5.298 banned derivatives on sports, election and entertainment events the same day. The securities regulator may still allow contracts on economic indicators. Brazil’s separate ban on fixed-odds betting in September 2026 does not mention prediction markets.

Argentina: Blocked. On March 11, 2026 a Buenos Aires City court, acting on a complaint from the city lottery, ordered telecoms regulator ENACOM to block Polymarket nationwide as an unauthorised gambling operator.

Colombia: Coljuegos ordered ISPs to block Polymarket and opened an investigation in September 2025.

Chile, Mexico, Peru: No specific action found as of October 2026.

Prediction Markets Regulation vs Gambling Regulation

Understanding why the classification question matters requires understanding what each regulatory framework actually does.

Gambling regulation framework

Gambling regulation focuses on consumer-facing risks: problem gambling, underage access, fairness of games, integrity of competitions. Standard components include:

• Per-operator licensing with significant capital requirements and ongoing compliance obligations
• Mandatory responsible gambling controls (deposit limits, self-exclusion, reality checks)
• Advertising restrictions to protect minors and vulnerable populations
• Anti-money laundering and source-of-funds requirements
• Integrity monitoring through data sharing with sports leagues and integrity bodies
• Per-jurisdiction licensing (state in US, province in Canada, national in most EU states)
• Tax structures that capture a percentage of gross gaming revenue

Financial regulation framework

Financial regulation focuses on market integrity, investor protection, and systemic risk. Standard components include:

• Registration of trading venues as exchanges, ATSs, or DCMs
• Market surveillance and trade reporting
• Insider trading and market manipulation prohibitions (enforced criminally)
• Capital requirements and clearing infrastructure
• Investor disclosure requirements
• Federal or supranational authority (one set of rules, not 50)
• Tax structures that capture income on realised gains

The practical difference

For operators, the difference is operational. A financial-instrument classification means one federal license, uniform rules, standard securities-industry infrastructure. A gambling classification means 50 state licenses (or equivalent), different rules in each jurisdiction, gambling-specific compliance infrastructure. The federal path is significantly cheaper and easier to scale.

For users, the difference is consumer protection. Gambling frameworks include explicit responsible gambling tools. Financial frameworks do not. If a prediction market operates under CFTC authority, the responsible gambling tools that sportsbooks must offer are not required.

For state regulators, the difference is revenue and control. State gambling taxes capture a meaningful share of gross revenue. Federal commodities classification means states collect nothing, and lose the policy levers they have built over a decade of legalised sports betting. This is why state attorneys general are fighting this hard.

For a deeper look at this structural comparison, see our prediction markets vs betting analysis.

Current Regulatory Flashpoints

Sports contracts: the most contested category

Understanding prediction markets regulation requires understanding where they fit in the broader gambling license landscape. Different jurisdictions classify them under different license categories: US as CFTC Designated Contract Market, UK as betting intermediary under UKGC, EU member states mostly as gambling requiring local licensing.

Sports event contracts are the specific category driving most of the US legal battles. Political contracts have relative federal clarity after Kalshi’s 2024 court victory. Sports contracts do not.

The reason: sports betting is a $17 billion US industry with decade of state-level regulatory development. If prediction markets can legally offer contracts on the same sporting events that state-licensed sportsbooks cover, they undercut that entire ecosystem. A bettor paying state gaming tax on a $100 NFL bet through DraftKings would see no reason to pay the same tax on an identical Kalshi contract with no state oversight.

Kalshi traded about $37 billion in August 2026 alone on The Block’s count, most of it sports. This is not a marginal policy debate. It is a direct competitive threat to state-regulated sportsbooks, and it is why Nevada, New Jersey, Massachusetts, Arizona, Connecticut, Illinois, and Maryland have all engaged.

Insider trading on prediction markets

Portugal’s January 2026 block, which followed reports of heavy betting on the presidential election before results were known, and Israel’s February 2026 arrests of military reservists accused of betting on Polymarket with classified information, highlight a regulatory gap. If prediction markets are classified as gambling, insider trading rules from financial markets law do not apply. If they are classified as financial instruments, they should, but enforcement is difficult across jurisdictions and user bases.

The broader question is whether classical insider trading frameworks translate to prediction markets. EU’s Market Abuse Regulation applies to instruments traded on regulated markets, but prediction market contracts on events like elections are not traditionally “instruments” in that regulatory sense. This gap is likely to tighten through 2026-2027 as enforcement actions accumulate.

Manipulation risks at scale

Ceasefire predictions in April 2026 sparked concerns about Polymarket insider trading when large positions were placed on specific diplomatic outcomes shortly before public announcements. The NFL has specifically flagged prop bet contracts as susceptible to manipulation: a single player’s performance is easier to manipulate than a team outcome, and the financial incentives on event contracts can be large enough to justify manipulation attempts.

Both Polymarket and Kalshi have integrity monitoring programmes, but they operate outside the traditional sports integrity framework built with licensed sportsbooks. This gap is a major argument used by state regulators and sports leagues arguing for gambling-style regulation.

Global Trends to Watch Through 2027

US Supreme Court resolution

The Third Circuit on one side and the Ninth and Sixth Circuits on the other have created a clear circuit split on federal preemption, and petitions are already in front of the Supreme Court. If the Court grants review in December or early 2027, a decision would most likely come by mid-2027 or in the following term. The CFTC’s October 2026 rules, which define licensed sportsbook bets out of the swap definition and event contracts into it, are the federal government’s attempt to tilt that decision before it is made. The outcome will define whether sports event contracts are federal-only or state-regulable, and whether the CFTC’s “exclusive jurisdiction” claim survives Constitutional review.

Either outcome is consequential. A pro-CFTC ruling cements the federal framework and opens prediction markets to nationwide expansion. A pro-state ruling forces prediction markets to comply with state gambling laws, essentially requiring them to become sportsbooks with state licenses.

Institutional adoption drives regulatory clarity

Media partnerships (CNN and CNBC integrating Kalshi data into broadcasts, FIFA naming ADI Predictstreet its official prediction markets partner) and institutional plumbing (CME Group clearing event contracts for FanDuel Predicts and DraftKings Predictions, Robinhood and Susquehanna running their own exchange, Rothera, since June 2026, ICE investing USD 2 billion in Polymarket) create pressure for regulatory certainty. Institutions do not deploy capital into contested legal frameworks. As prediction markets become embedded in financial news and institutional data feeds, the pressure for clear federal-level regulation will intensify.

European convergence around gambling classification

EU member states have overwhelmingly treated prediction markets as gambling. As more member states take formal positions, informal convergence around this classification is likely. A future EU-level initiative (similar to MiCA for crypto assets) could formalise this through coordinated gambling regulation or an explicit MiFID II carve-in for financial-themed event contracts.

UK model as export template

The UK’s clear Gambling Commission framework has avoided most of the problems bedeviling the US. Common Law jurisdictions following UK regulatory traditions (Australia, New Zealand, South Africa, Ireland, Singapore) are more likely to adopt the UK approach than the US approach. This could produce a durable split between the CFTC-led US model and a UK-led gambling model across the Commonwealth and adjacent markets.

Market structure evolution

Regulatory pressure is accelerating consolidation. Smaller decentralized platforms face mounting compliance costs they cannot absorb. Institutional-backed platforms have the resources to litigate and lobby: Kalshi raised at USD 11 billion in December 2025 and about USD 22 billion in March 2026, and Bloomberg reported in September 2026 that it was finalising a round at USD 40 billion, while Polymarket was reported in August 2026 to be raising at USD 21 billion. Neither of the two latest rounds had been confirmed by the companies at the time of writing. The prediction markets of 2028 will likely be dominated by a handful of heavily-capitalised, federally-regulated US platforms plus regionally-licensed alternatives in the UK, Gibraltar, Malta, and emerging frameworks in other jurisdictions.

What This Means for Operators and Investors

The regulatory landscape creates a clear strategic calculus.

For US-focused operators: CFTC DCM registration remains the gold standard. The Third Circuit ruling dramatically strengthens the legal position, but state-level risk remains until the Supreme Court rules. Operators without CFTC registration face existential legal risk. Sleeper Markets LLC sued the CFTC in late 2025 alleging the agency was intentionally delaying its DCM application, which underscores how much the license matters.

For globally-focused operators: Jurisdiction strategy matters more than product design. Operating in 160+ countries simultaneously (Polymarket model) means accepting blocks in restrictive jurisdictions and running compliance costs for diverse legal regimes. Operating in a single gambling-licensed jurisdiction (Matchbook UK model) is cleaner but smaller.

For investors: The CFTC’s pro-prediction-markets stance under Selig is not permanent. A change of administration or a regulatory personnel change could reverse the current enforcement posture. Capital deployed on the assumption that federal preemption holds is taking Supreme Court risk. Capital deployed into gambling-licensed platforms in specific jurisdictions takes less regulatory risk but accepts smaller market size.

For institutional users: Risk management and compliance workflows are more complex for prediction markets than for traditional derivatives. Firm policies around employee trading, insider trading, and disclosure need to contemplate event contracts specifically. The regulatory uncertainty also creates operational risk that traditional derivatives do not have.

Related Guides

• Prediction Markets Guide
• What Are Prediction Markets
• Are Prediction Markets Legal
• Prediction Markets vs Betting
• Best Prediction Markets Platforms
• Polymarket Review
• Kalshi Review
• Global iGaming Regulation Guide

The Bottom Line

Prediction markets regulation in 2026 is genuinely unsettled, and the next 12-18 months will resolve some of the biggest open questions. The US Supreme Court is the most consequential variable. A ruling confirming CFTC exclusive jurisdiction unlocks nationwide expansion and validates the federal framework. A ruling against federal preemption forces prediction markets to become state-licensed sportsbooks, which would collapse the competitive advantage they currently hold.

Outside the US, the picture is more settled but less favourable. The UK has a working gambling framework. Most of the EU has explicit bans. Australia and New Zealand have blocked access. Asia is mostly restricted. Latin America is mostly open with Argentina as a recent exception. That pattern is unlikely to shift dramatically absent a coordinated international framework, which nothing in 2026 suggests is coming.

For anyone participating in this market (as operator, investor, or user), the regulatory layer is now as important as the product itself. The winners will be platforms that can navigate multiple regulatory frameworks at once, maintain compliance costs as a core infrastructure investment, and litigate effectively when challenged. The losers will be platforms that assume either regulatory framework will win cleanly. Neither is going to.

FAQ

Are prediction markets legal in the US?

Yes, at the federal level. Kalshi holds a CFTC Designated Contract Market license, and Polymarket US operates through the CFTC-registered QCX exchange. Sports contracts face state-level challenges in more than a dozen states, and Kalshi’s sports contracts are currently blocked in Nevada, Washington and Michigan by state court orders. The Third Circuit ruled for federal preemption on April 6, 2026; the Ninth (August 28) and Sixth (September 25) Circuits ruled against it. New Jersey has asked the Supreme Court to resolve the split, and the CFTC’s October 2026 rules expressly classify event contracts as swaps.

Who regulates prediction markets in the UK?

The UK Gambling Commission. Its February 2026 position is that prediction markets would appear to be betting intermediaries, akin to betting exchanges like Betfair, rather than FCA-regulated financial products. Only UK Gambling Commission-licensed operators can legally serve UK users; in practice that means the exchanges, such as Matchbook (which powers easyBet Predictions) and Betfair, whose Predicts product has been in invite-only beta since April 2026.

Why are Polymarket and Kalshi blocked in the EU?

Most EU member states classify prediction markets as gambling under national gambling laws and block platforms that do not hold local licenses. France, Germany, the Netherlands, Belgium, Portugal, Italy, Spain, Denmark, the Czech Republic, Poland, Romania and Hungary have all acted against Polymarket, and Spain, Italy and the Czech Republic against Kalshi too. Nine regulators issued a joint statement on coordinated enforcement in June 2026. The EU has no unified prediction markets framework because gambling is regulated at the national level.

Can prediction markets operate under MiFID II?

Potentially for financially-themed event contracts, but not yet in practice. MiFID II’s Annex I Section C enumerates derivatives including options, futures, swaps, and forwards. Financially-linked prediction contracts (rates, commodities, equities) could plausibly fit. Event-based contracts (elections, sports, culture) fit less cleanly. No EU member state has formally adopted a MiFID II approach to prediction markets as of October 2026, and ESMA’s July 2026 statement points the other way: event contracts that do count as financial instruments may fall under national bans on selling binary options to retail clients.

What happens if the Supreme Court rules against Kalshi?

A Supreme Court ruling that state gambling laws can be enforced against CFTC-registered event contracts would force Kalshi, Polymarket US, and other platforms to comply with state gambling frameworks. This would effectively require them to become state-licensed sportsbooks for sports contracts, with per-state licensing costs and state-specific rules. The federal competitive advantage would collapse.

Are prediction markets legal in Canada?

Limited, but changing. Ontario’s securities regulator settled with Polymarket in 2025, Polymarket lists Ontario, Quebec, British Columbia and Alberta as close-only, and Kalshi restricts Canada on its own platform. The regulated route is Wealthsimple Predict, which offers Kalshi contracts and was authorised by the investment industry regulator CIRO in March 2026.

How does the CFTC approve or prohibit event contracts?

Under the CFTC Prohibition Rule (Rule 40.11), CFTC-registered DCMs can self-certify that contracts comply with the Commodity Exchange Act. The CFTC can review and prohibit contracts contrary to public interest, including gaming-related contracts. The agency’s interpretation of what constitutes “gaming” is itself contested, which is how sports contracts ended up in federal court.

What about political event contracts?

Relatively clear federally. A 2024 federal court ruling in Kalshi’s favor held that election-based contracts did not constitute illegal gambling under the CEA. The CFTC dropped its appeal in May 2025 under the Trump administration. Political markets have operated without significant regulatory challenge since. Senator Chris Murphy and Representative Greg Casar have proposed banning contracts on government actions, war and terrorism, and other bills target insider trading by officials, but none has passed. The CFTC’s October 2026 proposed rule would expressly classify political event contracts as swaps.

Do prediction markets need anti-money laundering controls?

Yes, typically. CFTC-registered DCMs must comply with Bank Secrecy Act and anti-money laundering requirements. UK-licensed operators comply with UKGC AML rules. EU-blocked operators face MiCA compliance for crypto-based products. Offshore unlicensed operators face AML requirements informally through banking relationships but may not comply rigorously. This is a growing enforcement area.

What is the MiCA impact on prediction markets?

MiCA has applied in full since December 30, 2024, and the transitional period for existing Crypto-Asset Service Providers ended on July 1, 2026. Crypto-settled prediction markets such as Polymarket depend on exchanges and on-ramps that now need MiCA authorisation, and an operator that exchanges or holds crypto for EU customers would need it too. It sits on top of national gambling restrictions; it does not replace them.

Which countries allow Polymarket today?

Fewer than a year ago. Polymarket’s own list as of October 2026 fully blocks Iran, Syria, Cuba and North Korea, and sets 34 countries to close-only (no new trades), including the United States, United Kingdom, France, Germany, Italy, Belgium, Poland, Singapore, Taiwan, Thailand, Australia, New Zealand, Brazil and Argentina, plus four Canadian provinces. Ireland, Japan, the Netherlands, South Korea and Malta (sports) are restricted on the website. On top of that, national regulators have blocked it in Portugal, Spain, Denmark, the Czech Republic, Hungary, Turkey, India, Indonesia and the Philippines. Chile, Mexico and Peru are among the larger markets with no action so far. The international platform remains blocked for US residents, who use the separate Polymarket US exchange.

Is Gibraltar licensing significant?

Yes, as a regulatory signal. Gibraltar licensed Predict Street Ltd as a betting intermediary on March 26, 2026, which local officials describe as Europe’s first prediction market licence. It shows a European regulator licensing prediction markets as betting rather than defaulting to bans. No other European regulator has followed so far. This creates a path for licensed European alternatives to Polymarket in jurisdictions where Polymarket is blocked.