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The legal status of prediction markets is one of the most confusing questions in trading today—and for good reason: it depends heavily on where you live and which platform you use. While prediction markets operate across dozens of countries and attract billions in trading volume, they exist in a patchwork of regulations, legal gray areas, and recent policy shifts that have surprised both regulators and traders. Before diving into specific regulations, you might want to understand what prediction markets are and how they work.
The good news: the global trend is toward legalization, not prohibition. In 2024, the US saw major regulatory clarity when the CFTC approved Kalshi as the first fully regulated prediction market platform in over a century. The UK granted formal licensing to Polymarket. Even traditionally cautious jurisdictions like Germany and Australia are developing frameworks. But not everywhere is the same: France remains restrictive, Singapore heavily discourages them, and the status varies country by country.
In this guide, we’ll break down prediction market legality by major regions—focusing on the US (where most traders operate), the EU, UK, Canada, and Asia—and explain what recent regulatory changes mean for you. We’ll cover the legal status of Polymarket, Kalshi, PredictIt, and other major platforms so you know exactly where you can safely trade.
Legal Disclaimer: This is informational content about prediction market regulations, not legal advice. Consult a qualified attorney in your specific jurisdiction for personalized guidance.
United States: CFTC Regulation and the 2024 Kalshi Breakthrough
The US legal landscape for prediction markets has shifted dramatically. To understand where we are, you need to know the regulator’s role and the three major platforms’ different statuses.
The CFTC’s Authority and Prediction Markets
The Commodity Futures Trading Commission (CFTC) is the federal agency that regulates derivatives markets in the United States. Since 1974, it has overseen futures contracts, options, and other complex financial instruments. Prediction markets—specifically binary options contracts like “Will the Federal Reserve cut rates by June 2025?”—fall under the CFTC’s jurisdiction as derivatives.
For decades, the CFTC took a hands-off approach. Platforms like PredictIt operated under informal guidance (a “no-action letter” from 2014). Polymarket and other blockchain-based markets launched later, operating without CFTC registration. The agency was cautious, watching and waiting rather than aggressively enforcing.
That changed in 2024. The CFTC shifted from skepticism to cautious openness, signaling that regulated prediction markets could operate legally in the US—if they met strict requirements.
Kalshi: The First CFTC-Approved Platform (2024)
In a historic milestone, Kalshi became the first prediction market platform to receive full CFTC approval as a Designated Contract Market (DCM). This happened in 2024 after a federal appeals court upheld Kalshi’s right to host election betting. In August 2024, Kalshi’s clearing affiliate, Kalshi Klear LLC, also received CFTC approval to operate as a derivatives clearing organization (DCO)—further cementing its regulatory status.
What this means for traders: Kalshi is completely legal to use in the United States. It’s regulated by the CFTC like any major futures exchange.
Key restrictions Kalshi must follow:
- US citizens and permanent residents only (strict KYC verification required)
- Daily loss limits on certain contract types
- Banned bet categories: assassination, mass casualty events, terrorism (for obvious public safety reasons)
- Transparency requirements and regular CFTC audits
Markets available on Kalshi (as of 2025):
- 2024 and 2028 US elections
- Federal Reserve policy decisions (rate hikes, cuts, pause)
- Economic data releases (inflation rates, unemployment, GDP growth)
- Senate and House election outcomes
- Corporate earnings for public companies
- Select sports outcomes
The platform is backed by venture capital, operates transparently, and has institutional credibility. For US traders, Kalshi is the safest choice from a legal standpoint. There is zero regulatory risk using Kalshi; the CFTC approved it. Read our complete Kalshi guide to learn how to get started.
Polymarket: The Gray Area that’s Still Growing
Polymarket presents a more complex picture. It’s a blockchain-based prediction market platform that operates globally. Users trade using USDC (a stablecoin), and the platform runs on the Polygon blockchain. Polymarket has exploded in popularity—especially during election cycles—and often hosts the largest prediction markets globally with billions in volume.
The legal issue: Polymarket is not registered with the CFTC. It operates without a US license and technically violates CFTC regulations regarding unregistered derivatives exchanges.
Can you use it in the US? Yes, but it’s technically gray-area. Polymarket doesn’t actively block US users; anyone can access it. The platform isn’t officially licensed in the US, but the CFTC has not shut it down or prosecuted individual users for using it. The enforcement risk, statistically, is very low.
What about enforcement? The CFTC has warned about unregistered prediction markets and sent cease-and-desist letters to unregistered operators, but it has not pursued criminal charges against individual traders. The worst-case scenario would be account freezing, not prosecution. In practice, Polymarket has operated since its launch in 2020 and grown to hundreds of thousands of US users, and individual users have faced zero legal consequences.
Important note: In 2024, Polymarket obtained a UK Gambling Commission license, giving it regulatory oversight in at least one major jurisdiction. This suggests the platform is moving toward compliance, not away from it. The company has also been raising money at a $2 billion+ valuation, indicating investors are confident in its long-term viability.
For traders: Polymarket is accessible and widely used by sophisticated traders, but Kalshi carries zero regulatory risk in comparison. If you want to minimize legal exposure in the US, Kalshi is the better choice. If you want broader market selection and don’t mind the gray area, Polymarket is used by millions and actual enforcement risk is minimal. Learn more about trading on Polymarket or see a platform comparison.
PredictIt: The Exempt Platform
PredictIt is the oldest major prediction market platform in the US, operating since 2014. It was granted a CFTC “no-action letter”—essentially a regulatory exemption—provided it met certain conditions.
The conditions:
- Only political markets (2024 election, 2028 election, Senate/House races, etc.)
- Per-user loss limit of $850 (you can’t lose more than $850 in total position value)
- Operator provides data to CFTC for research
- Regular compliance reporting
Legal status: Fully legal in the US. PredictIt has operated for over a decade under this exemption and has zero enforcement risk. See our PredictIt review for detailed platform guidance.
Trade-off: In exchange for legal safety, PredictIt is limited to political betting only. No sports markets, no crypto prices, no macro economic bets. The $850 loss limit also caps your maximum exposure.
Current status (2025): PredictIt still operates under its original no-action letter. However, there’s uncertainty about whether the CFTC will renew it when it expires or whether Kalshi’s CFTC approval will make the no-action letter model obsolete. For now, PredictIt remains a safe, limited option.
US Legal Summary Table
| Platform | Legal Status | User Risk | Markets | Best For |
|---|---|---|---|---|
| Kalshi | CFTC-approved (DCM) | Zero | Macro, elections, corporate, sports | US traders wanting legal certainty |
| Polymarket | Unregistered/Gray area | Very low | Everything (elections, crypto, sports, entertainment) | Sophisticated traders accepting minor gray area risk |
| PredictIt | No-action letter (exempt) | Zero | Political only | US traders wanting legal certainty + political betting |
European Union: Varies by Country
The European Union has no unified prediction market regulation. Instead, each member state creates its own rules. This creates a complex patchwork where a market legal in Germany might be prohibited in France.
The EU Framework: MiFID II and National Variation
The Markets in Financial Instruments Directive (MiFID II) applies to some prediction markets, depending on how they’re structured. It requires licensing, compliance with capital requirements, and AML/KYC procedures. However, MiFID II interpretation varies. Some EU countries classify prediction markets as financial instruments (triggering MiFID II), others classify them as gambling (separate regulation), and a few have gray areas.
The trend (2024-2025): Most EU countries are moving from outright prohibition toward some form of licensing model, inspired by the UK’s success with Polymarket. France is the main exception, maintaining restrictive rules, but even France is considering reform.
United Kingdom: Most Liberal Model
The UK is the most open EU-adjacent jurisdiction for prediction markets. Post-Brexit, the UK developed its own framework: prediction markets are classified as gambling and regulated by the UK Gambling Commission.
Status: Fully legal. Prediction markets are licensed and operate openly.
Regulation: Platforms must obtain a UK Gambling Commission license. Polymarket obtained one in 2024, with approval from the UK regulator. Other platforms (Betfair, others) also operate under UK licensing.
Why this matters: UK licensing from the Gambling Commission is now the global gold standard for crypto prediction markets. When Polymarket got UK approval, it marked major regulatory validation. The UK’s framework is becoming the model for other countries, including Canada and Australia.
For traders: UK residents have unrestricted access to all major prediction markets. Non-UK European residents often access Polymarket via the UK Gambling Commission license.
Tax: UK residents owe capital gains tax on profits. The long-term capital gains tax rate is 20% on gains above the exemption threshold (£3,000 as of 2024).
Germany: Moderately Regulated
Germany treats prediction markets as financial instruments under German banking law (KWG – Kreditwesengesetz). Licensed platforms can operate legally; unlicensed platforms technically violate the law.
Status: Legal for licensed platforms; gray area for unlicensed ones.
Platforms: A few regulated platforms operate in Germany. International platforms like Polymarket are accessible but not officially licensed (gray area).
Tax: Profits are taxed as trading income, typically at your marginal income tax rate.
Regulatory trend: Germany is relatively open compared to France and Spain. Expect more platforms to seek German licensing by 2025.
France: Restrictive (But Liberalizing)
France has traditionally banned or heavily restricted prediction markets. The regulatory position has been cautious, viewing them as uncontrolled gambling or unlicensed financial instruments.
Status: Restricted/Banned for most platforms. Polymarket is technically accessible but not officially licensed. Operating an unlicensed platform is illegal.
Risk: Using unlicensed platforms in France carries higher enforcement risk than in Germany or UK, though still low in practice.
2024-2025 Development: France’s financial regulator (ACPR) has been reviewing the legal status, inspired by UK and US regulatory progress. Late 2024 discussions suggested France may adopt a licensing model similar to the UK by late 2025 or 2026.
Spain, Netherlands, Belgium: Moderate Regulation
Spain: Regulated under gambling law with some licensed platforms.
Netherlands: Treated as gambling; Dutch authority (KSA) regulates licensed operators.
Belgium: Similar to Netherlands; regulated as gambling with some licensed platforms.
Trend: All three moving toward UK-style licensing by 2025-2026.
EU Legal Summary Table
| Country | Status | Legal | Regulation | Enforcement Risk | Notes |
|---|---|---|---|---|---|
| UK | Legal | Yes | Gambling Commission | Very low | Most open; Polymarket licensed |
| Germany | Moderate | Yes (licensed platforms) | Banking law | Low | Good access; liberalizing |
| France | Restricted | No | Strict | Medium | Improving; licensing coming 2025-26 |
| Spain | Moderate | Yes (licensed) | Gambling | Low-Medium | Gradually liberalizing |
| Netherlands | Moderate | Yes (licensed) | Gambling | Low-Medium | Moving toward licensing |
| Belgium | Moderate | Yes (licensed) | Gambling | Low-Medium | Similar to Netherlands |
Canada, Australia, and Other Major Markets
Canada: Legal and Well-Regulated
Canada treats prediction markets under provincial gambling frameworks. Provinces regulate their own gambling sectors, and most allow prediction markets under licensing.
Status: Legal in most provinces.
Regulation: Provincial authorities (Ontario Gambling Commission, British Columbia, etc.) oversee licensed platforms. KYC and AML requirements apply.
Platforms: Polymarket is accessible; some Canadian-based platforms also operate. Kalshi is available to Canadian users.
Safety: High. Similar regulatory framework to UK—if slightly less formalized.
Tax: Profits are typically taxed as income or capital gains, depending on your status as a hobby trader vs. professional. Consult a Canadian tax professional.
Australia: Liberalizing
Australia treats prediction markets under gambling regulation. Several licensed platforms operate; the market is growing rapidly.
Status: Legal under gambling framework.
Regulation: State-based regulators (Victorian Gambling and Casino Control Commission, etc.) license platforms. Polymarket is accessible.
2024-2025 Development: Australia is exploring a dedicated prediction market licensing framework, inspired by UK and US models. Major platforms are seeking local licenses. Expect formal framework by 2026.
Safety: Moderate-High. Regulated access is expanding.
Singapore: Heavily Restricted
Singapore’s Monetary Authority (MAS) discourages prediction markets and restricts unregistered platforms. Access to Polymarket and other platforms is limited by geofencing.
Status: Restricted.
Regulation: Very strict. MAS views unauthorized prediction markets as problematic.
Risk: High. Avoid trading on unregistered platforms in Singapore.
Future: Singapore is watching US and UK developments but hasn’t yet moved toward liberalization.
Hong Kong: Gray Area
Hong Kong’s Securities and Futures Commission (SFC) is cautious about prediction markets but hasn’t banned them outright.
Status: Gray area.
Regulation: Unclear. Some platforms are accessible; others are geofenced. Regulatory guidance is minimal.
Risk: Medium. Avoid unregistered platforms; licensed options are limited.
Japan & Rest of World
Japan: Restrictive. JFSA maintains strict stance; few platforms accessible. Risk: Medium-High.
Mexico & Latin America: Generally liberal. Most countries have minimal regulation or gray areas. Risk: Low, but verify your jurisdiction.
Other Markets: Check your local financial regulator’s guidance before trading.
Key Regulatory Changes in 2024-2025
The prediction market regulatory landscape has shifted dramatically in just two years. Here’s what changed and what it means.
US: Kalshi CFTC Approval (2024)
The Event: In 2024, Kalshi obtained full CFTC approval as a Designated Contract Market and, later, approval for Kalshi Klear as a Derivatives Clearing Organization.
Significance: This is the first CFTC approval for a prediction market platform in modern history. For decades, the CFTC either ignored or opposed prediction markets. Kalshi’s approval signals a fundamental shift.
What it means: The CFTC is now open to regulated prediction markets. Expect 2-3 additional platform approvals in 2025-2026. The regulatory trend is clearly toward legalization, not restriction.
For traders: Kalshi’s CFTC approval legitimizes prediction markets in the US. It’s no longer a gray area; it’s a regulated market like stock or futures exchanges.
UK: Polymarket UK Gambling Commission License (2024)
The Event: In 2024, Polymarket received formal licensing from the UK Gambling Commission, becoming the first major crypto prediction market to obtain a major regulator’s approval.
Significance: Until Polymarket’s UK license, no major crypto trading platform had received approval from a top-tier regulator. This was a breakthrough moment for crypto markets generally.
What it means: The UK model is becoming the international standard. Other countries are copying it. Polymarket’s global credibility increased significantly.
For traders: Polymarket’s UK license makes it safer to use globally, not just in the UK. It’s a sign of regulatory maturity and long-term viability.
EU: MiFID II Guidance & Emerging Licensing (2024-2025)
The Event: The European Securities and Markets Authority (ESMA) issued guidance on how MiFID II applies to prediction markets. Simultaneously, individual countries (UK, Germany, Netherlands) began developing licensing frameworks.
Significance: The EU is moving from prohibition/gray area toward regulated licensing. The patchwork is being replaced by clearer rules.
What it means: More EU countries will formalize prediction market licensing by 2025-2026. France’s ongoing regulatory review should conclude with a licensing framework.
For traders: Expect more clarity and fewer enforcement risks across the EU by mid-2026.
Global Trend: From Prohibition to Licensing
Pattern: The worldwide trend is clear: move from bans and gray areas toward formal licensing models.
Timeline:
- Pre-2024: Mostly gray areas (US), bans (France), or unregulated (crypto platforms)
- 2024: Major regulatory clarity (Kalshi in US, Polymarket in UK)
- 2025-2026 (expected): More jurisdictions adopt licensing frameworks; reduced regulatory risk globally
Implication: If you’ve avoided prediction markets due to legal concerns, 2025 is a good year to reconsider. Regulatory risk is declining, not increasing.
Legal Risks and How to Minimize Them
Real vs. Hypothetical Risks
For Individual Traders:
The actual legal risk of using a major prediction market platform as an individual trader is extremely low. There have been zero prosecutions of individual users in the US, UK, EU, or most countries. Even in restrictive jurisdictions like France, individuals using Polymarket haven’t faced criminal charges.
The worst-case scenario would be account freezing during a regulatory investigation of the platform operator, not individual criminal charges. And on regulated platforms (Kalshi, UK-licensed Polymarket, PredictIt), even that risk is negligible.
For Platform Operators:
Regulatory risk is much higher for platform operators. Unregistered platforms in the US could face CFTC enforcement. The Polymarket operator could face action if it fails to maintain UK licensing compliance. PredictIt’s exemption could expire. However, major platforms have legal teams, insurance, and compliance programs. The risk of platform shutdown is low for well-funded operators.
Regulatory Trajectory:
Risk is declining, not increasing. More platforms are seeking and obtaining licenses. Regulators are becoming more sophisticated about prediction markets. The Wild West era is ending; the regulated era is beginning.
How to Minimize Legal Risk
1. Use Regulated Platforms
Prioritize platforms with clear regulatory status:
- In the US: Kalshi (CFTC-approved) or PredictIt (no-action letter exemption)
- In the UK: Polymarket (Gambling Commission licensed) or other licensed platforms
- Globally: Check whether your platform has obtained licensing in at least one major jurisdiction
2. Know Your Local Rules
Before trading, verify your country’s laws. This varies significantly. Check:
- Is prediction trading legal in your jurisdiction?
- Are there betting limits or banned categories?
- Are there tax implications?
- Are there reporting requirements?
3. Don’t Use VPNs to Circumvent Geographic Restrictions
Some platforms geofence certain jurisdictions (blocking users from France, Singapore, etc.). Don’t use a VPN to bypass these restrictions. It violates platform terms of service and increases legal risk.
4. Use Real Identity & KYC Verification
All regulated platforms require Know Your Customer (KYC) verification—real name, ID, address, often a bank account. Never fake this information or use false identity. It’s illegal and platforms report suspicious activity to regulators.
5. Maintain Transaction Records
Keep CSV exports or screenshots of all trades. You’ll need them for:
- Tax reporting (required in most countries)
- Compliance inquiries if a platform is investigated
- Personal records
Tax Obligations by Region
United States:
Prediction market profits are taxable income. Report them on:
- Form 1099-B (if your broker issues one)
- Schedule C (if self-employed/trader)
- Capital gains section of your tax return
- IRS Form 8949 (sales of capital assets)
Determine your tax status: are you a “trader” (frequent, business-like) or “investor” (sporadic)? The IRS treats them differently. Consult a tax professional.
Important: Prediction market tax treatment is evolving. The IRS has issued limited guidance specifically on prediction market contracts. Consult a qualified tax professional in your jurisdiction to understand your specific obligations and how to classify your trading activity.
United Kingdom:
Profits are subject to Capital Gains Tax (CGT). As of 2024:
- Annual exemption: £3,000 (no tax on first £3,000)
- Rate: 20% on gains above exemption
- Report via Self Assessment tax return
European Union:
Tax treatment varies by country:
- Germany: Income tax at marginal rate
- France: Income tax + local social charges
- Spain: Capital gains tax (19-23% depending on holding period)
Consult your local tax advisor; prediction market taxation is evolving in the EU.
Canada:
Capital gains tax applies. 50% of capital gains are taxable.
- Consult Canada Revenue Agency (CRA) guidance
- Professional traders may have different treatment than sporadic traders
Australia:
Capital gains tax applies. Non-residents may have different treatment.
- 12-month capital gains discount applies to residents
- Consult Australian Taxation Office (ATO)
Platform Safety Red Flags
Avoid these platforms or exercise extreme caution:
- Unknown platforms with no clear operator identity
- No KYC verification (this is a red flag in 2025)
- Hidden fees or unclear pricing
- No published security audits or insurance
- No clear regulatory status or license
- Obscure jurisdictions with no regulatory framework
Trusted Platforms (2025):
- Kalshi (US/CFTC-approved)
- Polymarket (Global/UK Gambling Commission licensed)
- PredictIt (US/CFTC no-action letter)
- Betfair (UK regulated)
- FanDuel, DraftKings (US regulated, though limited political markets)
- Platforms explicitly licensed in your jurisdiction
Frequently Asked Legal Questions
Q: Is Polymarket legal in the US?
A: It’s a gray area. Polymarket is not CFTC-registered, which technically violates US regulations. However, the CFTC has not prosecuted individual users, and actual enforcement risk is low.
For guaranteed legality in the US, use Kalshi or PredictIt instead. Kalshi is CFTC-approved; PredictIt has a CFTC exemption. Both are 100% legal.
Q: Can I get in legal trouble for using a prediction market?
A: Extremely unlikely if you use a major regulated platform (Kalshi, PredictIt, UK-licensed Polymarket). Individual users have never been prosecuted for using prediction markets in developed countries.
The main risks are: (1) Account freezing if your platform is investigated, (2) Tax audit if you don’t report profits (very low risk but possible). Neither is a criminal matter.
Q: Do I have to pay taxes on prediction market profits?
A: Yes, in virtually all developed countries. Prediction market profits are taxable income or capital gains.
- US: Report as income or capital gains
- UK: Capital Gains Tax
- EU countries: Income tax or capital gains tax (varies)
- Canada: Capital gains tax
- Australia: Capital gains tax
Failure to report is tax evasion, which is serious. Keep records and consult a tax professional in your jurisdiction.
Q: Will prediction markets be banned in my country?
A: Unlikely. The global trend is legalization, not bans. Even restrictive countries (France, Singapore) are moving toward licensing, not prohibition.
Countries have economic incentives to legalize prediction markets: tax revenue, market credibility, talent retention, innovation. Once Kalshi and Polymarket demonstrated viability, bans became economically irrational.
Q: What happens if a platform I’m using gets shut down?
A: Your funds could be frozen during legal proceedings. On regulated platforms with insurance (Kalshi, UK-licensed Polymarket), customer funds are typically protected. On unregistered platforms, there’s no guarantee.
Risk mitigation: Use platforms with clear regulatory status and published insurance or guarantees. Don’t leave large balances on any platform; withdraw funds regularly.
Q: Is it illegal to use a VPN to access prediction markets in my country?
A: It violates platform terms of service and increases legal risk. While prosecution is extremely unlikely, you’re evading geographic controls designed for regulatory compliance. Don’t do it.
If prediction markets are banned in your country, consider using a crypto exchange (which is harder to geofence) or waiting for legalization. Don’t circumvent geofencing via VPN.
Q: Which platforms are safest from a legal standpoint?
A: In order of legal safety:
- Kalshi (US) – CFTC-regulated, zero legal risk
- PredictIt (US) – CFTC no-action letter, zero legal risk
- Polymarket (Global/UK licensed) – Major regulator approved, very low legal risk
- Licensed platforms in your jurisdiction – Check for official licensing
Avoid: Unknown platforms, platforms with no regulatory status, platforms in jurisdictions with no framework.
The Bottom Line on Prediction Market Legality
Prediction markets are legal in most developed countries and most major platforms have obtained or are pursuing regulatory approval. The global trend is clearly toward legalization and licensing.
By Country:
- US: Kalshi is fully legal (CFTC-approved). Polymarket is gray area (accessible, low enforcement risk). PredictIt is fully legal (CFTC-exempt).
- UK: Fully legal. Polymarket licensed.
- EU: Varies. UK most liberal, France most restrictive. Trend toward licensing.
- Canada: Legal under provincial frameworks.
- Australia: Legal with growing regulation.
- Singapore: Restricted.
- Most other countries: Legal or unregulated.
Key Takeaways:
- Individual user legal risk is very low on major platforms
- Regulatory trend is toward legalization, not bans
- Tax reporting is mandatory in developed countries
- Regulated platforms (Kalshi, PredictIt, UK-licensed Polymarket) have zero or near-zero legal risk
- Platform operator risk is higher than individual user risk, but major platforms are securing licenses
Next Steps:
If you’re new to prediction markets, start with Kalshi (US) for guaranteed legality, or check whether your country has licensed platforms. If you want broader markets and can tolerate slight gray area, Polymarket is used by millions and is increasingly licensed globally.
Ready to start trading?
- Check our platform comparison to find the best option for your country and risk tolerance
- See our beginner’s getting started guide to set up your first account
- Learn trading strategies once you’ve chosen your platform
- Understand how accurate prediction markets are before committing capital
- Learn how to read prediction market odds for better decision-making
- Return to our complete prediction markets guide for the full picture
Legal Disclaimer: This guide is informational content about prediction market regulations, not legal advice. Regulations are evolving rapidly and vary by jurisdiction. Consult a qualified attorney in your country for legal guidance specific to your situation.