Kalshi and Polymarket Face New US Scrutiny as Oversight Tightens 

A new client alert from law firm FBT Gibbons frames this as the start of a tougher compliance era for “event contracts,” the yes-or-no markets tied to real-world outcomes. The post says prediction markets have moved “from the margins of academia into a federally supervised market structure,” with the Commodity Futures Trading Commission (CFTC) increasingly recognized as the main U.S. regulator.

These markets list contracts that settle at $1 if an event happens and $0 if it does not. Prices between a penny and 99 cents act like an implied probability that updates as traders buy and sell. The post also draws a key distinction from sportsbooks: these platforms generally match buyers and sellers rather than taking the other side like a casino. Per FBT Gibbons, “Prediction market platforms match buyers and sellers rather than acting as the house.”

The regulatory inflection point, the authors argue, came when the CFTC approved Kalshi as a designated contract market in late 2020. That approval mattered because it pulled certain event contracts inside the federal derivatives perimeter. In effect, it gave compliant platforms a pathway to operate like other regulated exchanges, with expectations around market integrity, surveillance and customer protections.

But the scrutiny is widening, not easing, according to FBT Gibbons. It points to the CFTC’s early-2026 launch of an Innovation Advisory Committee that explicitly invited executives from both regulated and crypto-native platforms, including Kalshi and Polymarket, into discussions on modern market structure, AI and blockchain. That is a signal that prediction markets are no longer a side show. They are being folded into the same policy debates shaping digital assets and trading venues more broadly.

The harder issue is what happens when event contracts intersect with inside information. FBT Gibbons flags a new legislative push that would bar certain government officials and employees from trading contracts tied to policy actions or political outcomes when they possess material nonpublic information — in other words, inside information the public does not have. The post notes Rep. Ritchie Torres’ proposed “Public Integrity in Financial Prediction Markets Act,” introduced after reporting on a Polymarket trade tied to the reported capture of Venezuela’s Nicolás Maduro reignited concerns about privileged access and exploitation.

From a compliance standpoint, the alert reads like a checklist of what regulators will expect if this sector wants to grow up fast. The authors urge operators to build exchange-style rules and controls: clear rulebooks for listings and how outcomes are determined; monitoring that can detect manipulative behavior; and formal insider-trading restrictions, including attestations and escalation processes when red flags appear. They also emphasize customer identity checks and anti-money-laundering safeguards, sanctions screening, segregation of customer funds and routine reconciliations.

Just as important, the law firm warns that federal oversight does not automatically end state friction. Even federally registered venues may still face state-level challenges framed as consumer protection or gambling enforcement. That makes legal strategy and documentation part of the operating model, not a back-office afterthought.

What comes next, based on the FBT Gibbons analysis, is a clearer dividing line between platforms that embrace traditional market rules and those that rely on offshore status or loose governance. Expect more attention to who can trade politically sensitive contracts, how platforms police insider behavior, and whether Congress moves the Torres proposal forward.

Expect, too, that the CFTC’s advisory process will become a key venue for industry players to shape the next round of rules — and for regulators to signal that “move fast and break things” is not an acceptable posture when the product is a market.