Polymarket Gets US Green Light as Prediction Markets Challenge Sportsbooks

In the span of just a few years, prediction markets have leapt from obscure crypto experiments into the heart of financial, political and cultural debate.

And with the U.S. Commodity Futures Trading Commission (CFTC) on Wednesday (Sep. 3) issuing a no-action letter regarding event contracts, that momentum appears set to continue its trajectory forward.

The letter, issued in response to a request from QCX LLC, a designated contract market, and QC Clearing LLC, a derivatives clearing organization, both owned by Polymarket, in essence gives Polymarket, the world’s largest crypto-based prediction market platform, a regulatory green light to re-enter the American market.

The CFTC’s no-action letter allows event contracts without triggering standard swap data reporting and recordkeeping mandates.

Polymarket’s return is more than symbolic. From the start, the event contract platform had quickly gained prominence for its politically charged prediction markets, especially during the 2024 U.S. presidential race, only to be shut out in 2022 following a CFTC settlement and $1.4 million fine for operating as an unregistered derivatives facility.

But how do prediction markets compare to traditional sportsbooks? Depending on how you look, the comparison could be favorable. Traditional sportsbooks need licenses, jurisdictions and expensive overhead. Prediction platforms, by contrast, can blur the boundaries: a wager becomes a conditional transaction executed via smart contracts, settled nearly instantaneously.

For legacy operators like DraftKings and FanDuel, the implications are clear and immediate. Crypto prediction markets offer frictionless, global, low‑cost alternatives with instant settlement, all attractive features to digital-native bettors. If consumers grow accustomed to borderless, one-click payouts in cryptocurrency, the banking and fee lag of traditional rails may feel archaic.

Read more: Robinhood Sues States to Turn Sports Bets Into Wall Street Trades 

What’s striking is that event contract platforms didn’t push themselves into regulated wager markets directly. Instead, they embraced a strategy reliant on payments infrastructure, specifically stablecoins and crypto payouts, as a foundational technology.

Users already comfortable sending and receiving digital dollars suddenly found it easy to wager against predicted outcomes. Odds, contracts and settlements are just logic on top of money movement.

In the PYMNTS Intelligence report “Instant Payouts: The New Paycheck for a Real-Time Economy,” a collaboration with Ingo Payments, responses from more than 4,000 individuals found that 72% of consumers received at least one instant payment in the last year.

This is the essence of the “payments Trojan horse.” By treating payments as the on-ramp and event contracts as the wedge, platforms can stealthily onboard users familiar with digital transfers, then expose them to interactive, real-time market experiences.

Adding fuel to the fire, on Tuesday (Sep. 2), fantasy sports app Underdog announced that sports event contracts will be accessible to its customers through Crypto.com.

Still, it all frames a crucial question: when conditional payments linking to outcomes become indistinguishable from wagering, is the product a derivative, or gambling masquerading as finance?

See also: Prediction Markets Eye US Growth While Watching Out for Crypto Whales 

The growth of prediction markets is all happening against an uncertain regulatory backdrop, where federal and state-level oversight has yet to be clarified.

The result is a murky, fast-evolving rulebook in which the same “yes/no” contract might be treated as a commodity derivative by one agency, a sportsbook wager by another and a money transmission event by a third.

For example, Kalshi, another leading platform and Polymarket competitor, is also CFTC regulated and legal for American users, although it is currently facing an ongoing legal battle over its right to offer sports event contracts, as is Robinhood which has sued regulators in Nevada and New Jersey.

Robinhood  CEO Vlad Tenev, in an interview earlier this year, characterized prediction markets as distinct from gambling with societal value, though he acknowledged the regulatory gray zone.

After all, marketplaces would be wrong to assume that if the CFTC greenlights event contracts, that approval answers every question for sports betting. It doesn’t. After the Supreme Court struck down PASPA in 2018, sports wagering became a state-by-state regime, rifled with licensing requirements and compliance obligations, rather than a federal green or red light. Any product that looks and feels like a sportsbook bet will still attract scrutiny from state gaming agencies regardless of its treatment under the commodities laws.

The endgame isn’t to “win” a single label. It’s to assemble a compliant stack — CFTC-supervised market infrastructure for the contracts, state and federal compliance for the money movement, and consumer-protection practices that look a lot like those at regulated exchanges and sportsbooks.

At the same time, Polymarket and its peers still lag mainstream sportsbooks in user experience. Platforms must simplify or abstract away wallets, gas fees and jargon. The future of crypto prediction markets lies in making contracts feel like bets on ESPN, not DeFi dashboards.

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