The prediction market industry crossed $44 billion in global volume in 2025 and is running at $37 billion monthly as of January 2026. The regulatory landscape is not keeping pace. It is fragmenting. In the United States, a new CFTC chairman has signaled the most permissive federal stance in history — while 19+ lawsuits, 38 state AGs, three Congressional bills, and now federal prosecutors push in the opposite direction. In Europe, country-by-country bans are accumulating faster than any framework. Globally, no jurisdiction has created a bespoke prediction market regime.
This paper maps the actual state of regulation as of March 11, 2026. The conclusion: the industry is growing at 4x per year into a regulatory vacuum now filling with both litigation and — for the first time — actual legislation. The Iran strikes insider trading scandal has elevated the debate from gambling-vs-derivatives to national security. And yet yesterday, the CFTC chairman called prediction markets "truth machines" while Kalshi's CEO sat alongside the heads of CME, Nasdaq, and Deutsche Börse as an equal.
On March 10, Kalshi CEO Tarek Mansour sat on a headline panel at FIA Boca alongside the CEOs of CME Group, Nasdaq, Deutsche Börse, and SGX — moderated by the Wall Street Journal. The same day, CFTC Chair Selig called prediction markets "truth machines." Two weeks earlier, a Polymarket account made $515,000 betting on Iran strikes 71 minutes before the news broke. Three Congressional bills are now in draft. This is the state of play: simultaneous mainstreaming and existential legal threat.
The U.S. picture is defined by a single unresolved tension: the federal government and the states disagree on what prediction markets are. The CFTC says derivatives. State gaming commissions say gambling. Both cannot be right.
On January 29, 2026, CFTC Chairman Michael Selig withdrew the Biden-era proposed ban on political and sports contracts, vacated a 2025 staff advisory, directed new "clear standards" rulemaking, and signaled the CFTC may intervene in state litigation. He called the prior administration's approach a "frolic into merit regulation."
Kalshi faces 19+ federal lawsuits. Maryland ruled sports contracts "indistinguishable" from wagering. Massachusetts ordered geofencing in January. 38 states filed amicus support. The legal community expects the Supreme Court within 12–24 months.
Three bills are now in Congress: the Merkley-Klobuchar "End Prediction Market Corruption Act" banning officials from trading event contracts; the bipartisan Moore-Carbajal "Event Contract Enforcement Act" requiring the CFTC to prohibit contracts on terrorism, assassination, war, gaming, or illegal activity; and the Torres bill barring federal employees. Meanwhile, Mick Mulvaney launched "Gambling Is Not Investing" pushing for state regulation, and SDNY's Jay Clayton said today (March 9): "My prosecutors are looking at what laws we can use."
No unified EU prediction market framework exists. France, Belgium, Poland, Portugal, Hungary, Romania, and Ukraine have all banned or restricted Polymarket. Germany and Spain remain accessible. MiCA grandfathering ends July 2026. Eurex is reported weighing entry — which would be the first major European exchange in the space.
No jurisdiction outside the U.S. has created a dedicated prediction market regime. The UK classifies them under gambling. Singapore, Australia, China, and South Korea have banned or restricted access. Brazil is the most-discussed expansion market.
The competitive landscape has transformed beyond recognition. Yesterday (March 10) at the FIA Global Cleared Markets Conference in Boca Raton, Kalshi CEO Tarek Mansour sat on a headline panel alongside CME Chairman Terry Duffy, Nasdaq CEO Adena Friedman, Deutsche Börse's Thomas Book, and SGX Group CEO Boon Chye Loh. That image — a prediction market founder treated as a peer of the world's largest exchange operators — captures the moment. CFTC Chair Selig told the same conference that prediction markets are "truth machines" that create "accountability, transparency and information." Meanwhile: Cboe announced a patent-pending three-outcome framework (March 9); Nasdaq filed with the SEC for binary options on the Nasdaq-100 (March 2); CME's event contracts hit 100 million in 8 weeks; ICE launched institutional Polymarket data analytics; Kalshi and Polymarket combined for a record $5.35 billion weekly volume (March 2–8). On the integrity front, Kalshi disclosed it has opened 200 investigations and referred two insider trading cases to regulators, and Polymarket announced a Palantir partnership for sports betting surveillance.
Does the CEA preempt state gambling laws? Circuit courts are splitting. Supreme Court will likely resolve it.
90% of Kalshi volume is sports. The regulatory heat is almost entirely on sports contracts. Economic/political contracts face far less opposition.
The Iran strikes scandal changed everything. A Polymarket account made $515,000 betting on U.S.-Iran strikes 71 minutes before news broke. Within days: three Congressional bills, Mulvaney's lobbying group, and federal prosecutors signaling action. Prediction markets are now discussed in the context of national security.
By July 2026, every crypto platform in the EU without a CASP license faces enforcement. MiCA doesn't regulate prediction markets directly but constrains their crypto infrastructure.
On February 12, the Federal Reserve published "Kalshi and the Rise of Macro Markets" — finding prediction markets perform on par with or better than Bloomberg consensus, NY Fed surveys, and fed funds futures. They correctly identified the most likely Fed rate outcome on the eve of every FOMC meeting since 2022. The Fed's own research staff validating prediction market data quality carries enormous weight.
The industry is growing at 4x per year into a framework built for neither its scale nor its ambiguity. The CFTC's January pivot is being countered by three bills, a new anti-PM lobbying group, and federal prosecutors. The Iran betting scandal has shifted the debate from gambling to national security.
This is no longer just about gambling vs. derivatives. It is now about national security, insider trading, and whether prediction markets can exist without becoming a vector for profiting from classified information. That question will define 2026.