What Is a Designated Contract Market? The CFTC Licence Behind Kalshi and Polymarket US

A designated contract market is the federal licence that lets a US exchange list futures and event contracts to the public, and it is granted by the Commodity Futures Trading Commission under Section 5 of the Commodity Exchange Act. Both Kalshi and Polymarket US hold one. That single piece of paper is the reason they can offer contracts across most of the country, and the reason their state-level legal fights look so different from an ordinary sportsbook dispute. Kalshi is barred from offering its sports, election and entertainment contracts in Nevada, and Ohio and Tennessee may now enforce their gambling laws against it. (Facts checked on 10 November 2026.)

If you have spent any time trying to work out whether a prediction market is legal where you live, the acronym DCM will have come up. It sits behind nearly every substantive argument in court, every state attorney general's cease-and-desist letter, and every explainer about why Kalshi can offer sports contracts in some states where DraftKings cannot, a position several states are contesting. Worth understanding properly, then, because the shape of the licence explains the shape of the industry.

The licence itself

On 3 November 2020, the CFTC issued an Order of Designation to KalshiEX LLC, granting it status as a designated contract market under Section 5 of the Commodity Exchange Act and CFTC Regulation 38.3(a). That order is the entire origin story of regulated US prediction markets as a retail product. QCX LLC, doing business as Polymarket US, received its own designation on 9 July 2025. Both sit on the same CFTC list as ICE Futures US, the CME, Coinbase Derivatives and roughly thirty other venues.

The statute is terse about what a DCM has to do to get and keep its licence. 7 U.S.C. 7(d) sets out what it calls the "core principles for contract markets", and a board of trade has to comply with every one of them. The CFTC can add more by rule. In exchange, the exchange gets "reasonable discretion in establishing the manner in which" it complies. That phrase matters. It is what lets Kalshi and Polymarket US design their own matching engines, margin rules and surveillance systems rather than having a federal template imposed on them.

The core principles, in English

Twenty-three core principles sit in the statute. The ones that shape what you actually see as a trader are a smaller set.

The board of trade "shall list on the contract market only contracts that are not readily susceptible to manipulation" (core principle 3). This is the legal hook the CFTC has used historically to block election contracts it did not like, and the same hook Kalshi has fought hard in court to narrow.

It "shall have the capacity and responsibility to prevent manipulation, price distortion, and disruptions of the delivery or cash-settlement process" (core principle 4), including real-time monitoring and "comprehensive and accurate trade reconstructions". It must set position limits or position accountability for speculators (core principle 5). It must make daily settlement prices, volume, open interest and opening and closing ranges public for actively traded contracts (core principle 8). It must provide "a competitive, open, and efficient market and mechanism for executing transactions that protects the price discovery process" (core principle 9).

Reading those back, you can see the shape of a prediction-market exchange emerging without anyone naming one. Public prices. Audit trails. Position limits. Rules against manipulation. The federal regime assumes the venue looks like a futures exchange because, legally, it is one.

How new contracts get listed

Here is where the mechanics get interesting, and where the fights get hot. A DCM does not go back to the CFTC for individual approval every time it wants to list a new market. It self-certifies. The exchange files the contract terms with the Commission, attests that the contract complies with the Act and the Commission's regulations, and can list it.

The statute preserves the CFTC's power to review. Section 5 requires the exchange to comply with "any requirement that the Commission may impose by rule or regulation pursuant to section 12a(5)". The practical result is that most new contracts go live without a prior approval fight, and the Commission reserves its heavier scrutiny for the contested ones. That is how Kalshi has been able to roll out sports contracts, election contracts and a long tail of niche markets at speed. For a longer walk through what one of those listings actually looks like on the venue side, our guide to US event contracts is the companion piece.

Why the licence is the whole state-level fight

An ordinary online sportsbook needs a licence in every state where it operates. A DCM, Kalshi argues, does not. The CFTC's exclusive jurisdiction over futures and commodity option transactions is, on this reading, a federal pre-emption of state gambling law when the product is listed on a federally licensed exchange.

States have pushed back hard. The dispute is now a patchwork of federal and state court rulings running in opposite directions. The Third Circuit has ruled in Kalshi's favour in its New Jersey litigation. On 28 August 2026, in KalshiEX v. Assad, the Ninth Circuit ruled for Nevada, upholding the lifting of Kalshi's injunction and sending the election-contract question back to the lower court; a separate state court order keeps Kalshi's sports, election and entertainment contracts out of the state. The Sixth Circuit, in KalshiEX v. Schuler (25 September 2026), went the other way: it affirmed the denial of Kalshi's injunction against Ohio and vacated the injunction that had been stopping Tennessee from enforcing, holding that federal law does not preempt either state's gambling law. Kalshi has asked the full Sixth Circuit to rehear the case, New Jersey has asked the Supreme Court to review the Third Circuit ruling, and the Fourth Circuit is still to rule in KalshiEX v. Martin. The appellate map is, in short, split.

What the licence actually preempts, and in which contexts, is what every one of those cases is arguing about. It is not a settled question. For more on how the state map currently looks, our explainer on why CFTC regulation matters for state-level access walks through the venue-by-venue picture.

Who holds a DCM today

The CFTC publishes its list of designated contract markets and updates it as filings come through. Read on 10 November 2026, the list shows Kalshi (designated 3 November 2020), QCX LLC doing business as Polymarket US (9 July 2025), ProphetX LLC (11 June 2026), and more than two dozen other venues with Designated status. Alongside them sit a visibly growing queue of exchanges with Pending status, including Smarkets Board of Trade Exchange LLC, PredictIT Exchange DCM Inc. and Nasdaq MRX Futures LLC, among others.

That Pending column is worth watching. It is the pipeline of future US prediction-market venues, and the shape of the industry in two years will be determined by which of those applications the CFTC designates and which it does not.

What it does not cover

A designated contract market licence is not a blanket permission slip. It covers the venue, not every product. The CFTC can still review specific self-certified contracts under section 5c(c) of the Act, and has done so for contested listings in the past. It covers federal regulation, not state law in every circumstance; that is precisely what the current litigation is testing. It does not confer gambling-licence status, and no DCM is regulated as a sportsbook.

It also does not change anything about who settles your trade. Market resolution still runs through the exchange's own stated rules, which the DCM is required to publish under core principle 7. For how that plays out in practice on specific venues, our overview of market resolution walks through the mechanics.

iPredicta's take

iPredicta compares prices across ten venues, including Kalshi, Polymarket US, Polymarket's international exchange and ProphetX, and we read regulatory status as a first-order filter on where a market is actually tradable. The DCM label on a venue is what unlocks the entire US retail story, which is why the pending applications on the CFTC list get our attention almost as much as the live ones. We try to describe the current litigation as it stands, not as either side would like it to stand, and we update as rulings land.

The information in this article is general and not legal advice. The regulatory position changes often. Confirm anything decision-relevant with a qualified lawyer and with the venue itself before acting on it. The DCM list, 7 U.S.C. 7 and the Kalshi and Polymarket US designation documents were read on 10 November 2026, and the state-level litigation summary reflects the position as it stood on that date.

Frequently asked questions

Who grants a designated contract market licence?

The Commodity Futures Trading Commission grants it under Section 5 of the Commodity Exchange Act. A board of trade applies to the Commission, submits the materials the Commission requires under 7 U.S.C. 7(a), and is designated if the Commission is satisfied it can comply with the Act and the Commission's regulations. Kalshi's order was issued on 3 November 2020. QCX LLC, doing business as Polymarket US, was designated on 9 July 2025. The CFTC maintains a public list of designated contract markets, updated as filings come through, which is where you can see every venue that currently holds the licence.

What does a DCM actually have to do to keep its licence?

It has to comply with the twenty-three core principles in 7 U.S.C. 7(d) and any further requirements the CFTC imposes by rule. Those principles include listing only contracts that are not readily susceptible to manipulation, running real-time market surveillance, setting position limits or accountability for speculators, publishing daily settlement prices, volume and open interest for actively traded contracts, and providing a competitive and open execution mechanism that protects price discovery. The exchange has, in the statute's words, reasonable discretion in how it meets each principle, but the obligation itself is non-negotiable.

Do new contracts need the CFTC's approval before they are listed?

Usually no. A DCM self-certifies new contracts, filing the terms with the Commission and attesting that the contract complies with the Act and the regulations. The CFTC retains the power to review and to impose requirements under section 5c(c) of the Act. That is why most new markets go live quickly and only the contested ones attract a direct Commission fight. It is also why Kalshi and Polymarket US have been able to roll out large numbers of contracts at speed, with the CFTC stepping in on specific products rather than approving every listing in advance.

Does a DCM licence make Kalshi or Polymarket US legal in every state?

That is the exact question currently being litigated and it is not settled. Kalshi argues the CFTC's exclusive jurisdiction over futures preempts state gambling law for contracts listed on a DCM. State courts and federal courts have ruled in both directions. The Third Circuit has ruled in Kalshi's favour in its New Jersey case. On 28 August 2026, in KalshiEX v. Assad, the Ninth Circuit ruled for Nevada, upholding the lifting of Kalshi's injunction and sending the election-contract question back to the lower court; a separate state court order keeps Kalshi's sports, election and entertainment contracts out of the state. The Sixth Circuit, in KalshiEX v. Schuler on 25 September 2026, held that federal law does not preempt Ohio's or Tennessee's gambling law. Kalshi has asked the full Sixth Circuit to rehear the case, New Jersey has asked the Supreme Court to review the Third Circuit ruling, and the Fourth Circuit is still to rule in KalshiEX v. Martin. The appellate map is split.

Who else holds a DCM licence besides Kalshi and Polymarket US?

The CFTC's list shows more than two dozen designated contract markets, including ICE Futures US, the CME, Coinbase Derivatives, Bitnomial, ForecastEx, Small Exchange and Railbird, alongside more recent additions such as Sporttrade DCM, XV Exchange, Juice Exchange and ProphetX LLC, designated on 11 June 2026. The list also shows a Pending column with filings from Smarkets Board of Trade Exchange LLC, PredictIT Exchange DCM Inc., Nasdaq MRX Futures LLC, Limitless Markets US and others. The CFTC updates the list as filings move through. Reading it is the easiest way to see which venues are currently licensed and which are queueing for designation.