What an event contract actually is

A prediction market lets participants trade a contract on whether a defined event will happen by a defined date: a Federal Reserve rate decision, a Consumer Price Index print inside a stated range, the result of a sporting fixture. Each contract pays $1 if the event occurs and nothing if it does not, so its live price, somewhere between $0 and $1, is read as an implied probability. A contract trading at 62 cents implies the market puts the chance of the event at roughly 62%, and that number moves continuously as information arrives and traders take positions. That mechanic is what separates an event contract from a bet placed with a bookmaker at fixed odds: the price is discovered by two-sided trading, not quoted by the house.

In the United States, Kalshi and Polymarket's US exchange list these contracts as designated contract markets regulated by the Commodity Futures Trading Commission, the same licence category as the Chicago Mercantile Exchange. Polymarket's US arm received an amended CFTC order of designation on 25 November 2025 allowing customers to reach it through futures commission merchants. That federal licence sits at the centre of the current dispute: whether a contract that settles on a sports result is a "swap" traded on a federally registered market, and therefore within the CFTC's exclusive jurisdiction, or a bet that state gambling law can reach.

Why institutions are paying attention

Two institutional interests are converging on the same product. The first is ownership and distribution. Intercontinental Exchange, the parent of the New York Stock Exchange, said on 7 October 2025 that it would invest up to $2 billion in Polymarket at a pre-investment valuation of roughly $8 billion, and that it would become "a global distributor of Polymarket's event-driven data, providing customers with sentiment indicators on topics of market relevance." On 27 March 2026 ICE announced a further $600 million direct investment, on top of its initial $1 billion, plus up to $40 million in purchases from existing holders, which it said completed its obligations under the arrangement. Which incumbents sit between institutions and new venues is a question we have looked at in who controls institutional access on-chain.

Kalshi raised $1 billion at an $11 billion valuation on 2 December 2025, led by Paradigm, then a further $1 billion at $22 billion on 7 May 2026, led by Coatue. The company said its annualised trading volume had tripled over the prior six months, from $52 billion to $178 billion, that volume from institutional clients had risen 800% over the same period, and that it planned to court hedge funds, asset managers, proprietary trading firms and insurers. CME Group launched its own event contracts in December 2025, pitched at retail traders and spanning financial indicators, cultural moments and sports, and said on 13 February 2026 that 100 million had traded in eight weeks.

The second interest is the price as a data feed, independent of anyone trading it. A Federal Reserve staff working paper dated 12 February 2026, "Kalshi and the Rise of Macro Markets" by Anthony M. Diercks, Jared Dean Katz and Jonathan H. Wright, found that distributions implied by Kalshi's contracts on inflation, unemployment, payrolls, GDP and the federal funds rate were comparable in forecasting accuracy to the New York Fed's Survey of Market Expectations and the Bloomberg consensus, while updating more frequently, and covered several variables for which no alternative measure exists. It is staff research: the authors' views, not the Board's.

The federal question: swap or bet

The Commodity Exchange Act lets the CFTC bar an event contract from a regulated market if it involves "activity that is unlawful under any Federal or State law, terrorism, assassination, war, gaming, or other similar activity" and the Commission determines it is contrary to the public interest. How that test applies to sports contracts is still being written.

What the regulator has done so far, in order:

  • Withdrawn. On 4 February 2026 the CFTC withdrew its June 2024 event contracts proposal and staff letter 25-36 of 30 September 2025 on sports event contracts. Chairman Michael S. Selig, sworn in on 22 December 2025, said the withdrawal reflected "the CFTC's commitment to lawful innovation in our markets."
  • Consulted on. An advance notice of proposed rulemaking, published on 16 March 2026 with comments due by 30 April, asked among other things: "Is gaming synonymous with, or more or less extensive than, the scope of activities covered by State and Federal gambling statutes?"
  • Proposed. On 10 June 2026 the Commission proposed amending Regulation 40.11 and adding a new Appendix F, setting out a three-step test: is the contract an event contract in an excluded commodity, does it involve an enumerated activity, and if so, is it contrary to the public interest. Selig said the CFTC "will protect the integrity of our regulated markets without standing in the way of responsible innovation." Comments closed on 27 July 2026. We found no final rule as of this writing. This is a proposal, not law.

What the courts have ruled

States have not waited for the rulemaking. In 2025 Nevada's Gaming Control Board and New Jersey's Division of Gaming Enforcement sent Kalshi cease-and-desist letters over its sports contracts, and Kalshi sued both, arguing that the Commodity Exchange Act preempts state gambling law for contracts on a CFTC-registered market. Both cases have now reached federal appeals courts, at the preliminary injunction stage rather than on final merits, and the two courts disagree.

In KalshiEX, LLC v. Flaherty, decided on 6 April 2026, the Third Circuit ruled 2-1 to affirm a preliminary injunction barring New Jersey from enforcing its gambling law against Kalshi's sports contracts. The majority treated the contracts as swaps within the CFTC's exclusive jurisdiction and noted that the CFTC had not determined them contrary to the public interest. Judge Jane Roth dissented, describing the products as "virtually indistinguishable from the betting products available on online sportsbooks."

In KalshiEX, LLC v. Assad, decided on 28 August 2026, a Ninth Circuit panel affirmed in part, and remanded in part, a Nevada district court's order dissolving the preliminary injunction that had protected Kalshi, holding that Kalshi had not shown a likelihood that the Act preempts Nevada's gaming regulations as applied to its sports contracts.

On 2 September 2026 New Jersey petitioned the Supreme Court to review the Third Circuit's decision, asking "whether the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act preempted States from regulating sports bets that occur within their jurisdictions if those bets are offered on markets registered with the Commodity Futures Trading Commission." The Court has not acted on the petition as of this writing.

Outside the United States: gambling law and a binary options ban

The UK splits the question by subject matter. The Financial Conduct Authority's Perimeter Report, first published on 26 March 2026 and last updated on 16 July 2026, says prediction market products "linked to non-financial events (such as sporting or political outcomes) fall under the Gambling Commission's remit", while those referencing "financial or certain climatic events" fall within the FCA's perimeter. There, the FCA's "current view is that the financial PMPs we have seen are binary options", which keeps them under the permanent ban on selling binary options to retail consumers that came into force on 2 April 2019.

The Gambling Commission set out its view on 4 February 2026: depending on the business model, "it would appear current products would fall within the definition of a 'Betting Intermediary'", the licence that covers betting exchanges, and "there are criminal offences associated with operating without an appropriate licence." In early September 2026 The Times reported that the FCA had held talks with platforms about easing its ban for financial prediction markets. The FCA has not confirmed those talks, and its published position still supports the ban.

In continental Europe the response has come from national gambling regulators. On 17 June 2026, as the football World Cup began, the regulators of Belgium, France, Germany, Italy, the Netherlands, Poland, Portugal, Spain and Switzerland issued a joint statement warning that unlicensed prediction market platforms expose users to illegality, blocked funds, fraud based on insider information and financial volatility, and pledging coordinated action against operators that break local rules. The statement is a warning and an enforcement commitment, not a licensing regime.

Ruled, proposed, pending

As with the wider question of what regulators have actually permitted, a proposal, a court's preliminary ruling and a warning letter are three different things, and this subject has all three live at once.

  • Regulator action in force: the CFTC's 2024 proposal and its sports staff letter are withdrawn; the UK's retail binary options ban applies to financial prediction market products as the FCA currently sees them.
  • Court rulings, at the preliminary stage: a federal injunction bars New Jersey from enforcing its gambling law against Kalshi's sports contracts; no federal injunction now shields Kalshi from Nevada's.
  • Pending: the CFTC's June 2026 proposal; New Jersey's Supreme Court petition. Reported, unconfirmed: the FCA talks on easing the binary options ban.
  • Proposed legislation: on 23 March 2026 Senators Adam Schiff and John Curtis proposed barring CFTC-regulated entities from listing contracts tied to sporting events and prohibiting casino-style games on prediction market platforms.

None of this is legal, tax or investment advice. An institution weighing these contracts as a hedge or a data source needs its own counsel on the rule in force where it operates.