Prediction markets: US-regulated event forecasting, explained

Sports event contracts first appeared on CFTC-registered exchanges in December 2024 and January 2025. Brokers and sportsbook brands followed, and by October 2026 more than a dozen exchanges had been designated by the CFTC. This guide covers what prediction markets are, how pricing works, who oversees them and where the legal fight stands.

What is a prediction market?

A prediction market is an exchange where people trade contracts on the outcome of a future event. Each contract asks a yes-or-no question (will the Fed cut rates at its next meeting, will a team win tonight) and pays $1 if the answer is Yes and $0 if it is No.

In the US, these instruments are called event contracts, a type of derivative. They trade on exchanges registered with the Commodity Futures Trading Commission (CFTC), and the other side of your trade is another user, not the platform. That is the core difference from a sportsbook, which sets its own odds and takes the opposite side of every bet.

How prediction markets work

Every contract settles at either $1 or $0, so prices run between 1¢ and 99¢. Because one side must win, a Yes and a No on the same question together are worth $1 at settlement.

The price is a rough probability. If Yes trades at 62¢, traders as a group are pricing the outcome at roughly 62%. Fees and the gap between buy and sell prices make that reading approximate, not exact.

A worked example. In a hypothetical market, Yes trades at 62¢. You buy 50 Yes contracts for $31.00. Using Kalshi’s widely reported taker formula (0.07 × contracts × price × (1 − price), rounded up to the cent), the fee is 0.07 × 50 × 0.62 × 0.38 = $0.8246, which rounds up to $0.83.

• If the event happens, you receive $50.00, a profit of $18.17 after the fee.
• If it does not, you lose $31.83.
• Your break-even point is $31.83 ÷ $50 = 63.7%. You need the event to be more likely than that for the trade to have positive expected value.

You do not have to hold until the end. You can sell your contracts back into the market at the current price, locking in a gain or cutting a loss. Our guide to how prediction markets work walks through order books, limit orders and selling early with more numbers.

Who regulates prediction markets?

The CFTC regulates them under the Commodity Exchange Act. Several types of registered firm are involved:

• DCM (designated contract market): the exchange that lists contracts and matches orders. Kalshi, Polymarket US, Crypto.com’s CDNA, ForecastEx, Novig’s Ludlow Exchange and DraftKings’ DKeX are all DCMs.
• DCO (derivatives clearing organization): the clearinghouse that holds collateral and settles trades.
• FCM (futures commission merchant): the broker that holds customer accounts and money and routes orders to exchanges. Robinhood, FanDuel Predicts, Coinbase and Interactive Brokers act in this role.

A DCM can list a new contract by self-certifying that it complies with federal law; the CFTC can then review or stay it. Under Chairman Michael Selig, the agency has backed the industry. It withdrew a 2024 proposal that would have restricted event contracts (February 4, 2026), proposed rewriting Rule 40.11, which governs contracts involving “gaming” and other listed activities (June 10, 2026), sued nine states, and used emergency authority on August 11, 2026 to direct Kalshi to keep operating under federal core principles after New York sued.

The major US prediction market platforms

You can reach US prediction markets in two ways: open an account directly with an exchange, or trade through a broker app that routes your order to one.

• Kalshi is the longest-running exchange built for event contracts. KalshiEX LLC was designated a DCM on November 3, 2020, and it offers sports, politics, economics, weather and culture markets. Read our Kalshi review.
• Polymarket US is run by QCX LLC, designated a DCM on July 9, 2025. It publishes an official fee formula and pays makers a rebate. It is separate from the offshore polymarket.com. Read our Polymarket US review.
• Robinhood offers event contracts through Robinhood Derivatives, LLC, an FCM that routes to Kalshi, ForecastEx, Rothera and Crypto.com’s exchange. Its commission is capped at $0.01 per contract. Read our Robinhood prediction markets review.
• FanDuel Predicts launched December 22, 2025, on CME Group contracts. It charges 2% of potential payout, and its official offer terms list 18 states where sports contracts are available. Read our FanDuel Predicts review.
• Novig runs its own exchange, Ludlow Exchange (designated June 16, 2026), and launched nationwide on August 4, 2026. It charges no fee on pre-game straight trades. Read our Novig review.

Several other names are worth knowing. Interactive Brokers offers ForecastEx contracts with no commission and a $0.01 exchange fee. Coinbase offers Kalshi-operated markets to US residents outside Nevada. Crypto.com runs its own exchange and began sports contracts in December 2024. Webull routes to Kalshi with flat per-contract fees. DraftKings Predictions moved onto its own DKeX exchange in June 2026.

Key prediction market terms

Benefits of prediction markets

• Prices are set by users. There is no house margin built into the odds; you pay a disclosed fee instead.
• You can exit early. Contracts can be sold before the event, so a position can be managed as information changes.
• Defined risk. On a standard Yes/No contract, the most you can lose is what you paid plus fees.
• Breadth. Beyond sports, markets cover economic data, interest rates, weather, elections and culture.
• Federal oversight. Exchanges operate under CFTC core principles, and the agency has brought enforcement cases for manipulation and insider trading.

Risks to understand

• Legal uncertainty. Court rulings and orders have taken Kalshi’s sports contracts out of Massachusetts, Michigan, Nevada, Utah and Washington, and availability can change within days.
• Thin markets. In low-volume markets, a few orders can move the price, and you may not be able to sell at a fair level.
• Costs add up. Fees, the spread and deposit charges can turn a small edge into a loss.
• Settlement disputes. Outcomes depend on the wording of contract rules. Read them before you trade; our guide to how markets settle explains the process.
• It is still a wager on uncertainty. Most short-term traders do not have an informational edge over the market.

What prediction markets cost

Costs fall into three buckets: trading fees, the spread and funding fees.

Most exchanges use a fee of θ × contracts × price × (1 − price), which is largest at 50¢ and shrinks toward zero at the extremes. On 100 contracts at 50¢, that is $1.75 on Kalshi (taker) and $1.74 on Polymarket US (taker, schedule effective October 1, 2026). Brokers price differently: Robinhood caps its commission at $0.01 per contract plus an exchange fee of up to $0.01, Webull charges $0.01 plus $0.01 on both opening and closing trades, and FanDuel Predicts charges 2% of potential payout. Kalshi notes that a 2% processing fee may apply to debit-card deposits.

Our guide to prediction market fees has worked examples at 10¢, 50¢ and 90¢ and a trade cost calculator.

Who can use prediction markets?

Kalshi, Robinhood, FanDuel Predicts and DraftKings Predictions set the minimum age at 18, and you must be a US resident located in an eligible state. Kalshi kept 18 as its minimum in May 2026 while adding controls aimed at minors, according to Newsmax. By contrast, most state-licensed sportsbooks require bettors to be 21. Ohio’s Casino Control Commission cited under-21 users when it moved to fine Kalshi $5 million in April 2026, as reported by 13abc.

Broker apps add their own requirements. Robinhood, for example, needs an individual brokerage account and settled cash; instant deposits cannot fund event contracts.

Are prediction markets legal?

As of October 4, 2026, prediction markets on CFTC-registered exchanges are legal under federal law. The dispute is whether sports contracts are also subject to state gambling law.

• The 3rd Circuit sided with Kalshi against New Jersey on April 6, 2026 (2–1), finding sports contracts are likely “swaps” and that federal law likely preempts state law.
• The 9th Circuit ruled against Kalshi in Nevada on August 28, 2026 (3–0), and the 6th Circuit ruled against it in Ohio and Tennessee on September 25, 2026 (3–0).
• The 4th Circuit (Maryland) heard argument on May 7, 2026, and has not ruled.
• New Jersey has asked the Supreme Court to resolve the split in Flaherty v. KalshiEX (No. 26-299); the response is due November 9, 2026. Robinhood and Crypto.com have filed their own petitions from the Nevada losses, as covered in our report on the Supreme Court petitions.

Meanwhile states are suing platforms, passing laws and, in Kentucky, North Carolina and Illinois, adding taxes. Our state-by-state legal tracker is reviewed weekly.

Prediction markets vs sports betting

A sportsbook is the counterparty to your bet and builds its margin into the odds. A prediction market matches you with another trader and charges a fee. Sportsbooks are licensed state by state and generally require bettors to be 21; prediction markets are federally regulated and generally open at 18. Prediction markets also let you sell a position before the game ends at the market price. For the full comparison, including a worked vig-versus-fee example, read prediction markets vs sports betting.

How we research prediction markets

Chance Ledger’s coverage is documentary. We work from CFTC filings, court opinions, state regulator releases and each operator’s own fee schedules, help pages and promotion terms, and we date every fact we publish. We have not yet opened accounts or placed trades, so we make no claims about app speed, support quality or withdrawal times. Where we rely on secondary reporting, we name the source; where a fact could not be confirmed, we leave it out or label it. Our full criteria are on the methodology page.

Using prediction markets responsibly

Treat money in a prediction market as money you can afford to lose. Set a budget before you trade, avoid chasing losses, and be wary of promotional credits that encourage more volume than you planned. If trading stops feeling like a choice, our responsible play page lists support resources, including 1-800-GAMBLER.