polymarket.health
Lesson 10·Regulation & Risk·9 min read

Are Prediction Markets Legal in the US? (2026 Update)

Kalshi is fully legal nationwide. Polymarket geoblocks the US. PredictIt operates under a CFTC no-action letter. Here's the full state of play.

The legal status of prediction markets in the United States changed dramatically between 2022 and 2025. A CFTC settlement pushed Polymarket offshore, a federal court fight opened Kalshi's election contracts to all 50 states, and Robinhood plugged event contracts directly into its retail brokerage. This article reflects the situation as of 2026 — but always verify with the platforms themselves before depositing, because state-level pushback is still live.

Kalshi: fully legal

Kalshi is regulated by the Commodity Futures Trading Commission (CFTC) as a Designated Contract Market. After winning a federal court ruling in 2024 that affirmed its right to offer election contracts, Kalshi now operates legally in all 50 states. Customer funds sit in segregated US bank accounts and every listed contract has been formally certified or approved.

State-level regulators have periodically pushed back — several state gaming commissions filed objections to Kalshi's sports contracts in 2025 — but CFTC preemption has held. Practically, if you're a US resident with a US bank account, Kalshi works the way E*TRADE works.

Polymarket: blocked in the US

Polymarket settled with the CFTC in January 2022 over operating an unregistered binary options market. It paid a $1.4 million penalty and agreed to block US users. It now geoblocks US IP addresses and requires geographic attestation at signup. Using a VPN to access Polymarket from the US violates the platform's terms of service.

There is no federal statute criminalizing the individual user, but accounts detected as US-based can be frozen and funds returned only after identity verification. Polymarket has signaled intent to seek US authorization, but has not announced a concrete path or timeline.

Robinhood event contracts: legal via Kalshi

Robinhood added event contracts to its brokerage app in 2025 by routing trades through Kalshi's underlying CFTC-regulated exchange. Because the venue is Kalshi, Robinhood event contracts inherit Kalshi's legal status: available in all 50 states, funded via ACH, and issued proper 1099 tax forms. Robinhood adds its own per-contract fee on top.

PredictIt: academic exemption

PredictIt operated under a CFTC no-action letter granted to Victoria University of Wellington. The no-action letter has been challenged and amended multiple times; PredictIt's continued operation has been preserved through litigation. Position limits are strict — typically $850 per market — and the platform is primarily used by researchers and small traders rather than serious speculators.

Manifold and play-money platforms

Manifold Markets uses Mana, a play-money currency, and is therefore not subject to gaming or derivatives regulation. It is legal everywhere in the US. Manifold is popular with forecasters, researchers, and hobbyists who want to test skill and build public forecasting track records without financial risk.

State-level laws and sports contracts

CFTC regulation generally preempts state gambling laws for federally-approved contracts. However, sports contracts have triggered the most pushback from individual state gaming regulators, several of whom issued cease-and-desist orders to Kalshi in 2025. Kalshi has defended its position in court so far, but the legal landscape for sports event contracts specifically is still evolving state by state.

What could change

The CFTC under a new administration could revisit its 2024 posture on event contracts, either loosening restrictions (opening a US-registration path for Polymarket) or tightening them (limiting sports or election contracts). Congressional action on event contracts has been proposed but not passed. State attorneys general are the wildcard — one hostile state ruling could reshape access even if federal law doesn't change.

Practical guidance

If you're a US resident who wants to trade prediction markets legally: use Kalshi directly, or Robinhood if you already have a Robinhood account. Both give you full US legal cover, tax forms, and access to all major contract categories. Don't use a VPN to access Polymarket — the risk to your funds is real and the tax and legal exposure is worse.

Frequently asked

Is it illegal for me to use Polymarket from the US?
There is no federal statute that criminalizes the individual user, but using Polymarket from the US violates the platform's terms of service, and accounts can be frozen. Kalshi and Robinhood's event contracts are the legally-cleared US alternatives.
Will Polymarket return to the US?
As of 2026, Polymarket has signaled intent to seek US authorization but has not announced a concrete path or timeline. Any US relaunch would likely involve either acquiring a CFTC-regulated exchange or partnering with one — both processes take 12–24 months minimum.
Can I be prosecuted for using a VPN to access Polymarket?
There is no known case of the US government prosecuting an individual for VPN access to Polymarket. The realistic risks are: your account being frozen by Polymarket, your funds being returned only after burdensome KYC, and self-reporting complications at tax time.
Which states restrict Kalshi's sports contracts?
Nevada, New Jersey, and several other gaming-heavy states have challenged Kalshi's sports contracts as unlicensed sports betting. Kalshi has defended its CFTC preemption in court and continued serving those states pending resolution. Situations change — check Kalshi's status page before trading sports.
Are prediction market winnings taxable?
Yes. Winnings are usually treated as short-term capital gains (Kalshi, Robinhood) or ordinary income (some crypto interpretations). Kalshi issues 1099-B forms. Polymarket does not, so users are responsible for tracking on-chain activity themselves.
Is PredictIt still open?
As of 2026 PredictIt is still operating under its amended no-action letter, though it has narrowed its market listings. Position limits are strict and liquidity has thinned relative to Kalshi and Polymarket. Best used by researchers and small traders.
What's the safest US-legal prediction market?
Kalshi. It has full CFTC regulation, segregated US bank custody, tax reporting, and consumer-protection frameworks. Robinhood inherits the same underlying protection because it routes through Kalshi.
Where can I check whether a platform is up before trading?
Independent status monitors like polymarket.health and kalshi.health track availability of each platform in real time. Platforms also publish their own status pages, but third-party monitors often reflect user-visible outages faster than official channels.

The .health network

Independent status monitors for the tools and markets we track.

AI models

AI platforms

Dev platforms

Prediction markets