Are Prediction Markets Legal in the US? State-by-State Guide

The short answer for most Americans: yes, prediction markets on CFTC-regulated platforms are legal where you live. The longer answer involves understanding why a handful of states have pushed back, and how the regulatory framework shapes which platforms you can actually use.

The federal framework

CFTC-regulated prediction markets operate under the Commodity Exchange Act, which gives the Commodity Futures Trading Commission authority over derivatives contracts — including event contracts tied to real-world outcomes.

When the CFTC granted Kalshi a Designated Contract Market license in 2020, it established the legal basis for prediction markets as a federally regulated financial product, distinct from gambling. Subsequent platforms — including Polymarket, OG.com, DraftKings Predictions, and others — have obtained similar regulatory status.

The federal classification matters because US law generally preempts state law when federal regulation exists. A state cannot ban a product the federal government has explicitly authorized through a dedicated regulatory framework.

Why some states still restrict access

Despite the federal framework, several states have taken the position that prediction markets constitute illegal gambling under state law and have pushed platforms to block their residents.

The states that most commonly appear on restriction lists include:

• Illinois
• Maryland
• Nevada
• Ohio
• Arizona
• Montana
• Michigan (for some platforms)
• Massachusetts (for some platforms)
• Washington state (for crypto-based platforms)

Nevada and New Jersey have been particularly aggressive, arguing that the CFTC authorization does not override their state gambling monopoly frameworks. Nevada's Gaming Control Board has sent cease-and-desist letters to several platforms.

The legal conflict is ongoing. Several platforms have challenged state-level restrictions in court, and the outcome of those cases will shape the map significantly in 2026 and beyond.

The Kalshi legal battle

In 2023–2024, Kalshi fought a high-profile legal battle against the CFTC itself over political event contracts. The CFTC had initially rejected Kalshi's application to list markets on congressional control, arguing they were contrary to the public interest.

Kalshi sued, and in 2024 a federal court ruled in Kalshi's favor. This decision was significant: it confirmed that federally authorized event contracts on political topics are legal, and it limited the CFTC's ability to reject contracts on public interest grounds alone.

The case set an important precedent and opened the door for broader political markets on regulated platforms.

Crypto-based platforms and state law

Platforms like Polymarket operate differently from CFTC-registered exchanges. Polymarket uses blockchain technology and USDC cryptocurrency, which puts it under a different regulatory framework involving both the CFTC and FinCEN.

US users can access Polymarket, but the platform has faced additional state-level scrutiny because crypto-based derivatives straddle multiple regulatory jurisdictions. The restricted state list for Polymarket is longer and more fluid than for purely dollar-based CFTC platforms.

Sweepstakes and non-CFTC platforms

Platforms like Underdog Predictions operate under sweepstakes or fantasy sports frameworks, which are governed by a patchwork of state laws rather than the CFTC. These platforms are generally available in more states than traditional sportsbooks but have different restrictions than CFTC-regulated exchanges.

The key difference: sweepstakes platforms do not involve real-money contracts that settle at $1.00. They use virtual currency or prizes instead.

What to do before signing up

The regulatory map changes faster than any guide can track. Before depositing on any platform:

• Check the platform's current state availability page — every regulated platform publishes one.
• Note that availability can change — a state that was supported last year may be restricted now, or vice versa.
• If you've recently moved, update your address with the platform before trading.
• Consult a legal professional if you have specific concerns about your state's laws.

Attempting to use a VPN or false address to circumvent state restrictions violates platform terms of service and potentially federal law. Don't do it.

The direction of travel

The overall trend is toward more access, not less. Federal courts have generally supported the CFTC framework. More states are observing prediction market regulation work without incidents that would justify prohibition.

That said, states with strong gaming lobbies — where the existing casino and sportsbook industry would lose market share to prediction markets — are likely to remain restrictive for longer. Nevada, in particular, has significant financial incentives to limit competition from federally regulated alternatives.