The Future of Regulation: Is Your Trading Legal?
Let’s talk about the elephant in the room: the law. For years, prediction markets in the US were treated like illegal gambling houses. But the winds are shifting. We are currently living through the most important regulatory transition in the history of event contracts. If you’re trading on these platforms, you need to understand where the red lines are.
The CFTC vs. The World
In the United States, the Commodity Futures Trading Commission (CFTC) is the school principal. For a long time, their rule was simple: "If it looks like a bet on a horse race or an election, it’s illegal." They viewed these markets as having no "economic purpose" and being ripe for manipulation.
However, recent court battles (led largely by Kalshi) have challenged this. The courts are starting to agree that prediction markets actually provide a massive public service: they are the most accurate forecasting tool we have. This has opened the door for legal, regulated election markets for the first time in decades.
Polymarket’s "Grey Area" Status
Polymarket lives in a different world. It’s an offshore, decentralized platform. While they technically don't allow US residents to trade, the decentralized nature of the blockchain makes that hard to enforce. This leads to what we call "regulatory arbitrage." You get better variety and higher volume on Polymarket, but you lack the legal protections given by a US-regulated exchange like Kalshi.
Will They Ban It?
Total bans are becoming less likely. The cats are out of the bag. Governments are realizing that if they ban it, people will just move to offshore crypto sites where there is zero oversight. The future is likely regulated integration—where you’ll be able to trade these markets through your standard brokarage account, just like a stock.
What This Means for You
If you trade on Kalshi, keep your tax documents in order. If you trade on Polymarket, be aware that you are operating in a fast-moving legal environment. At Poly Hawk, we track these shifts daily to ensure our tools remain compliant and our users stay informed.