Prediction market activity continues to expand sharply. According to data compiled by The Block, monthly taker notional volume across the three key venues Kalshi, Polymarket International and Polymarket US reached USD 44.8 billion in June 2026, up 75% from USD 25.66 billion in May and a roughly four time increase from the estimated volume of ~11 billion in December 2025. The latest increase was concentrated at Kalshi, where monthly volume rose 87% to USD 31.5 billion and accounted for roughly 70% of the volume across the three venues.

The composition of activity has shifted alongside the increase in scale. Political contracts dominated during the 2024 US presidential election cycle with politics-related contracts accounting for 90% of Kalshi volume and 65% of Polymarket International volume across October and November 2024. The market has since become substantially less dependent on elections, with sports contracts developing into the principal source of recurring turnover. From July 2024 through April 2026, sports contracts accounted for 80% of Kalshi volume and 39% of Polymarket International volume. The 2026 FIFA World Cup provided the latest major catalyst, with more than USD 2 billion traded in Polymarket International’s Soccer category during the tournament’s first 10 days and sports-related activity helping drive the broader June volume high.

At the same time, the contract universe has widened to encompass geopolitical developments, macroeconomic policy, crypto, weather, culture and public statements, supporting a more continuous flow of activity across the calendar. While sports has become the largest recurring category, political, geopolitical and crypto-related contracts remain material components of the market. The escalation of the Middle East conflict — most notably the direct US–Iran confrontation — illustrates how major geopolitical shocks can generate concentrated surges in trading. According to TRM Labs, in February 2026, 23 date-specific Polymarket sub-markets on whether and when the United States would strike Iran generated approximately USD 253 million in volume. On February 28, the simultaneous resolution of several Iran-related markets drove Polymarket to a then record single day volume of USD 425 million.

The rapid expansion of prediction markets has drawn renewed regulatory and supervisory attention, particularly in the United States. During the first half of 2026, the Commodity Futures Trading Commission (CFTC) stepped up activity across three distinct areas: defending federal authority over registered event contract markets, clarifying which underlying events may be unsuitable for trading, and strengthening safeguards against manipulation and the misuse of non-public information.

The jurisdictional debate intensified with the growth of sports contracts. Several states, including Arizona, Connecticut, Illinois, Nevada, New York and Wisconsin, argued that products equivalent to sports bets should remain subject to state gambling, licensing and consumer protection requirements. The CFTC maintained that event contracts listed on designated contract markets are commodity derivatives governed by the Commodity Exchange Act and that state laws cannot be used to regulate or prohibit those federally registered venues. It advanced this position through a widening series of amicus briefs and lawsuits. Even under the CFTC’s position, however, federal jurisdiction would settle only who regulates the market. It would not determine which events may be traded.

That distinction became more relevant as the contract universe widened. In June, the CFTC proposed amendments to Regulation 40.11, which implements the Commodity Exchange Act’s special review framework for contracts involving unlawful activity, terrorism, assassination, war, gaming or similar activity. The proposal would define when a contract "involves" one of these activities and establish a structured 90-day review based on contract-specific public interest factors. It would interpret war to include belligerent military activity beyond formally declared conflicts, terrorism to include physical and non-physical attacks such as cyberattacks, and assassination to include any intentional killing. The broad definitions reflect concerns that reliable information may be scarce, sensitive information may be concentrated among insiders, prices may be manipulated to send misleading signals and settlement may be difficult to verify. The proposal would also define gaming to include games of chance, skill and athletic ability, including sports. Sports contracts based on overall outcomes or longer-term statistics could remain permissible where settlement is objective and effective integrity controls are in place. By contrast, contracts on player injuries, officiating decisions, discrete actions by individual participants, physical altercations, pre-collegiate events and casino-style games of chance would be more likely to be excluded.

Market integrity also moved into sharper focus following CFTC complaints alleging trading on classified military information and confidential Google data, together with earlier exchange cases involving a political candidate and a video editor. The cases highlighted the particular exposure of event contracts to individuals with advance knowledge of, or direct influence over, the underlying outcome.

The CFTC’s response combined the explicit application of its existing derivatives market framework with guidance tailored to prediction markets. A February enforcement advisory confirmed that established prohibitions on misuse of confidential information, wash sales, non-competitive and disruptive trading, fraud and manipulation apply to event contracts, and reiterated exchanges’ standing obligations to maintain audit trails, conduct surveillance, enforce their rules and refer potential violations. A March prediction-markets advisory then translated the broader requirements for designated contract markets, including real-time monitoring and the duty to list only contracts that are not readily susceptible to manipulation, into more specific expectations for event contract design and oversight. Exchanges were asked to assess manipulation risk across individual contract structures, identify the methodology and data used for settlement, and evaluate those sources for reliability, objectivity and resistance to manipulation. For sports contracts, the advisory also encouraged pre-listing engagement with leagues, use of league integrity standards and restricted participant lists, information-sharing with integrity monitors, reliance on official league data for settlement and cooperation in league investigations. The CFTC reinforced this approach through the first such memorandum of understanding with Major League Baseball, followed by a similar arrangement with the National Hockey League. The agreements establish designated contacts, recurring consultations, written information requests and confidentiality protections, with the Major League Baseball agreement providing for meetings at least monthly. Although information sharing remains voluntary, the arrangements create standing channels for coordination on risks affecting both the underlying sport and related event-contract markets.

Beyond this, concerns remain over event outcome resolution and the practical application of contract rules. A sample of 123 complaints for the period since January points to repeated consumer concerns over the clarity, consistency and transparency of settlement decisions. Complainants describe uncertainty around how contract terms are interpreted, which sources of evidence take precedence, how unusual or disrupted events are treated, and how final outcomes and payout calculations are determined.

Regulatory attention has also extended beyond market conduct and settlement practices to the operational framework for event contracts and products that provide indirect exposure to them. To that end, the CFTC proposed replacing a patchwork of staff no-action letters - temporary assurances that it would not recommend enforcement for specified reporting failures - with a dedicated regime requiring exchanges, brokers and clearing firms to report position and transaction data for certain fully collateralised event contracts, rather than applying the broader reporting framework designed for swaps. The U.S. Securities and Exchange Commission (SEC) separately sought comment on exchange-traded funds (ETFs) offering exposure to event contracts, focusing on whether they fit within the existing regulatory framework, require additional portfolio or disclosure safeguards, or warrant longer review periods before their registrations take effect automatically.

Internationally, access to prediction market venues including Polymarket and Kalshi remain controversial. At present, access to the venues remains banned or restricted across a large share of countries - with Kalshi's restrictions extending to more than 50 countries and Polymarket International’s to nearly 30 - including Australia, Singapore, the United Kingdom, France, Italy and large parts of Africa. These access limitations sit within a broader regulatory patchwork in which event contracts may be treated as financial instruments, binary options, gambling products or crypto assets, depending on their structure and the nature of the underlying event. Binary options are subject to particularly stringent treatment, including outright retail prohibitions in several countries. For example, the United Kingdom bans their sale, marketing and distribution to retail consumers, Australia bans their issue and distribution to retail clients, and equivalent national product intervention measures apply across all EU Member States. For prediction markets, this creates a potential perimeter issue, since a fixed-payout yes/no event contract may be classified by its economic substance as a binary option, regardless of the venue’s branding or presentation of the product as a forecasting tool.

Amid the increasing interest in these markets, several authorities have issued targeted statements. In the European Union, European Securities and Markets Authority (ESMA) clarified in July that a product’s commercial label does not determine its regulatory treatment. Event contracts linked to MiFID II underlyings qualify as derivatives and are likely to fall within national measures prohibiting the marketing, distribution or sale of binary options to retail clients. Distribution to non-retail clients also requires MiFID II authorisation. Contracts outside the MiFID II perimeter may instead be governed by national gambling laws or, where tokenised, the Markets in Crypto Assets Regulation. In April, the Canadian Securities Administrators (CSA) and the Canadian Investment Regulatory Organization (CIRO) reminded market participants that anyone trading, or facilitating trading in, event contracts that qualify as securities or derivatives must comply with applicable registration and recognition requirements. In relevant CSA jurisdictions, Multilateral Instrument 91-102 prohibits the advertising, offering, sale or other trading of a binary option with an individual where the contract has a term to maturity of less than 30 days. Two CIRO regulated dealers may currently facilitate access to qualifying contracts, including on regulated foreign markets, subject to specific conditions. However, no prediction market has itself been recognised as an exchange or registered as a dealer by the CSA.