There is no single answer to whether a prediction market counts as gambling. It depends on which country you are in, what kind of contract is being traded, and, in the United States, which federal appeals court happens to have ruled most recently. The UK's Gambling Commission and US federal regulators approach the question through different laws, and three US federal appeals courts have split on it in the space of a few months.
That is the bottom line. What follows is the reasoning behind it, grounded in the statutes, the regulator statements and the court decisions themselves. No prediction about where any of this ends up, no advice about what any individual should do with the answer.
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The UK answer: a betting intermediary, says the regulator
Start with the statute. Section 9 of the Gambling Act 2005 defines betting broadly: making or accepting a bet on the outcome of an event, on the likelihood of something occurring or not occurring, or on whether something is true. That is a wide net, and in the Gambling Commission's view, set out below, current prediction-market products fall within it.
There is a carve-out. Section 10 says a bet is not a bet for the Act's purposes if making or accepting it is a regulated activity under section 22 of the Financial Services and Markets Act 2000. That is why UK spread betting is overseen by the Financial Conduct Authority rather than the Gambling Commission.
So what are they? Section 13 defines a betting intermediary as a person who provides a service designed to facilitate the making or acceptance of bets between others. In a blog post dated 4 February 2026, the Gambling Commission said current prediction-market products would appear to fall within that definition, that their core is akin to a betting exchange, that betting exchanges have operated in Great Britain since 2000, and that unlicensed operators should not target Great Britain. Operating without a licence, the Commission added, can be a criminal offence.
The Commission's public register lists Smarkets (Malta) Ltd and TSE Malta LP, trading as Betfair, as holders of remote betting intermediary licences. On 15 October 2026 neither Polymarket nor Kalshi appeared on it. For its part, Polymarket's own documentation lists the United Kingdom as a regulatory-restricted jurisdiction where users can close existing positions but cannot open new ones. For more on how the Commission frames the category, see our walkthrough of the UK Gambling Commission's view on prediction markets.
One other UK rule is worth flagging because it sits next door. The FCA, in policy statement PS19/11, permanently banned the sale, marketing and distribution of binary options to retail consumers from 2 April 2019. The ban applies to binary options sold to retail consumers as a financial product.
The US federal position: a CFTC-regulated exchange
Cross the Atlantic and the framing changes entirely. The Commodity Futures Trading Commission designated KalshiEX LLC as a designated contract market in November 2020. The CFTC describes designated contract markets as exchanges most like traditional futures exchanges, open to all types of traders including retail customers. At federal level, in other words, the CFTC oversees Kalshi as a futures-style exchange. Whether every contract it lists is a derivative rather than a bet is the question the courts below are divided on.
That framing has a limit written into the Commodity Exchange Act itself. Under 7 U.S.C. section 7a-2(c)(5)(C), the CFTC may find that an event contract is contrary to the public interest if it involves unlawful activity, terrorism, assassination, war, gaming or similar activity. The CFTC's Rule 40.11 says a registered exchange shall not list a contract that involves, relates to or references gaming. The CFTC proposed in June 2026 to define what gaming means for this rule, as set out below.
Whether Kalshi's contracts involve gaming has already been tested in court. In KalshiEX LLC v. CFTC, the US District Court for the District of Columbia ruled on 12 September 2024 that Kalshi's contracts on control of Congress did not involve unlawful activity or gaming. The court record shows the CFTC's appeal was closed in May 2025 after the agency moved to dismiss it. On 4 February 2026 the CFTC withdrew its 2024 proposed rule on event contracts and its September 2025 staff advisory on sports contracts. On 12 June 2026 it proposed a new rule, 'Prediction Markets; Public Interest Determinations', that would amend Rule 40.11 and define gaming; as of 15 October 2026 it was still a proposal.
Then the agency moved on the definitional question itself. On 9 October 2026 the CFTC proposed to define 'swap' so that it expressly covers event contracts including sports, political, cultural and weather contracts. The same day it issued an interim final rule excluding casino-style gambling products, including sportsbook wagers and casino games, from the definition of swap. Both proposals draw a line between what the CFTC treats as a derivative and what it treats as gambling.
The state challenges: the appeals courts are split
Why are states involved at all, if this is federally regulated? Because states run their own gambling laws, and when Kalshi started listing sports event contracts those laws came into play. The courts have not spoken with one voice. For the state-by-state picture see our guide to whether Kalshi is legal in all 50 states.
On 6 April 2026 the US Court of Appeals for the Third Circuit, by two votes to one, upheld an injunction for Kalshi against New Jersey, holding that federal commodities law likely preempts the state's gambling law (KalshiEX v. Flaherty).
On 28 August 2026 the Ninth Circuit went the other way in Kalshi's case against Nevada (KalshiEX v. Assad). Ruling at the preliminary-injunction stage, it held that Kalshi had not shown its sports event contracts were likely swaps, finding their substance to be sports gambling, so Nevada may apply its gaming law while the case continues. It sent the question of Kalshi's election contracts back to the lower court. On 25 September 2026 the Sixth Circuit also ruled against Kalshi, allowing Ohio and Tennessee to apply their gambling laws to its sports contracts. It held, in the alternative, that even if the contracts were swaps, federal law would not override Ohio's or Tennessee's gambling laws.
Three circuits, two outcomes, one product. New Jersey asked the US Supreme Court on 2 September 2026 to review the Third Circuit decision in Flaherty v. KalshiEX, No. 26-299; as of 15 October 2026 the Court had not said whether it will take the case. A Maryland federal court refused Kalshi an injunction on 1 August 2025 and the appeal is pending in the Fourth Circuit; a Massachusetts case is before that state's Supreme Judicial Court. Both are still live.
The pattern that emerges is not confusion so much as unresolved doctrine. The courts are divided on two questions: whether sports event contracts are swaps at all, and whether federal commodities law displaces state gambling law if they are.
Exchange or bookmaker? The economic difference matters
Tuck inside the UK Commission's language is a distinction that explains why the category question is hard. The Gambling Commission describes a remote betting intermediary licence as allowing an operator to bring two or more betting parties together where it does not have liability for their bets, commonly known as a betting exchange. Bookmakers hold a separate general betting licence.
The economic difference is simple enough to say out loud. On an exchange, you trade against other people at a price, and the venue does not take the other side of your position. On a bookmaker, the operator sets the odds and takes the other side; if you win, the house loses. One business is a matching engine with a fee; the other is a counterparty.
Prediction markets, mechanically, are the first kind. Users post orders, those orders match against other users' orders, and the platform does not take the other side of the trade. The Commission's own description matches this: it said the core of these products is akin to a betting exchange. For more on how the mechanics map onto the sports-betting world, see our comparison of prediction markets and sports betting. The mechanics do not determine the legal answer, but they are the terrain the legal argument is fought on.
What is still undecided
Several things. Whether the US Supreme Court will take the New Jersey petition. How the Fourth Circuit will rule on the Maryland appeal, and how the Massachusetts Supreme Judicial Court will rule on the case before it. Whether the CFTC's proposed amendment to Rule 40.11 and its proposed 'swap' definition become final rules, and in what form. Whether other states follow Nevada, Ohio and Tennessee into litigation. And, hanging over all of it, whether a definitive answer on 'gaming' at the federal level narrows or widens the gap with how the UK Gambling Commission reads its own section 9.
Anyone who tells you the question is settled is reading only part of the record. The honest answer, for now, is that the UK and the US answer the question under different laws, and inside the US the answer currently depends on which appeals court covers the state.
Frequently asked questions
Are prediction markets legally classed as gambling in the UK?
The UK Gambling Commission has said that current prediction-market products would appear to fall within the statutory definition of a betting intermediary. In a blog post dated 4 February 2026, the Commission said the core of these products is akin to a betting exchange, pointed out that exchanges have operated in Great Britain since 2000, and warned that unlicensed operators should not target Great Britain because operating without a licence can be a criminal offence. The underlying statute is section 9 of the Gambling Act 2005, which defines betting broadly, together with section 13, which defines a betting intermediary. The Commission's register did not list Polymarket or Kalshi on 15 October 2026.
Why does the CFTC treat Kalshi as a derivatives exchange rather than a gambling site?
Because the CFTC designated KalshiEX LLC as a designated contract market in November 2020, placing it in the same statutory category the CFTC uses for traditional futures exchanges. The CFTC describes designated contract markets as exchanges most like traditional futures exchanges, open to all types of traders including retail customers. The Commodity Exchange Act, at 7 U.S.C. section 7a-2(c)(5)(C), lets the CFTC find an event contract contrary to the public interest if it involves gaming or similar activity, and Rule 40.11 bars registered exchanges from listing contracts that involve, relate to or reference gaming. The CFTC's June 2026 proposal would define gaming for this rule; it is not yet final.
Why have US appeals courts reached different conclusions about Kalshi?
Because they disagree on whether federal commodities law preempts state gambling law when the contract in question looks like a sports bet. On 6 April 2026 the Third Circuit upheld an injunction for Kalshi against New Jersey, holding that federal law likely preempts the state's gambling law. On 28 August 2026 the Ninth Circuit ruled the other way in Kalshi's case against Nevada, holding at the preliminary-injunction stage that the sports event contracts were likely not swaps because their substance was sports gambling. On 25 September 2026 the Sixth Circuit also ruled against Kalshi, allowing Ohio and Tennessee to apply their gambling laws. New Jersey has asked the US Supreme Court to review the Third Circuit decision.
What is the difference between a betting exchange and a bookmaker?
On an exchange you trade against other people at a price, and the venue itself does not take the other side of your bet; on a bookmaker, the operator sets the odds and takes the other side, so when you win the house loses. The UK Gambling Commission describes a remote betting intermediary licence as allowing an operator to bring two or more betting parties together where it does not have liability for their bets, commonly known as a betting exchange. Bookmakers hold a separate general betting licence. Prediction markets match users' orders against each other, which is closer to the first model; the Commission said their core is akin to a betting exchange.
Can prediction markets be regulated as financial products rather than gambling?
In the US, Kalshi operates as a CFTC-designated contract market, overseen by the CFTC rather than by a gambling regulator, although federal appeals courts are divided on whether its sports contracts are swaps or bets. In the UK, section 10 of the Gambling Act 2005 creates a similar carve-out: a bet is not treated as a bet for the Act's purposes if making or accepting it is a regulated activity under section 22 of the Financial Services and Markets Act 2000, which is why spread betting is regulated by the Financial Conduct Authority. The Gambling Commission has said current prediction-market products would appear to fall within its definition of a betting intermediary.
This article explains the law as it stood on 15 October 2026. It is for information only and is not legal advice.