U.S. Users Skirt Bans on Polymarket
Despite explicit prohibitions, U.S.-based wallets traded $571 million in notional value across Polymarket’s political markets over the last 12 months. This figure outpaces Hong Kong’s $422 million in the same period, highlighting persistent demand from American participants even as the platform blocks U.S. users by IP address due to legal constraints.
The effectiveness of these blocks is questionable. Allium, a data provider analyzing onchain behavior rather than IP addresses, could only tie about 6% of Polymarket’s political-market wallets to a country. This leaves the true scale of U.S. participation uncertain, but the available numbers suggest that workarounds—such as VPNs or foreign intermediaries—are common.
Of the twelve largest U.S. markets on Polymarket, five involved bets on the Iran war and the single biggest was a $20.8 million market on whether Ukrainian President Volodymyr Zelenskyy would wear a suit.
On paper, geofencing should keep Americans out of these markets, but the volume tells a different story.
Kalshi Battles State-Level Legal Hurdles
Kalshi, one of the largest U.S.-based prediction market operators, is currently embroiled in legal disputes across several states. In Minnesota, authorities have classified prediction markets as illegal activity, prompting an ongoing court fight. Nevada’s Supreme Court denied Kalshi’s emergency motion on Wednesday to halt a requirement that it block Nevada customers from most trading activity; this denial was signed by three state justices and leaves Kalshi exposed to further legal risk if it fails to geofence its business by court-imposed deadlines.
In Michigan, regulators secured a temporary two-week restraining order against Kalshi to stop it from offering or promoting sports betting in the state.
The company also sued Ohio’s gaming regulator on Monday, seeking to halt penalties for allegedly running an unlicensed sports-betting operation. As of March, nearly a dozen U.S. states had moved against platforms like Kalshi and Polymarket, either seeking to shut down their operations or bring them under state gambling laws and tax frameworks.
Regulators Grapple With Defining Prediction Markets
Definitional ambiguity remains at the heart of regulatory challenges. The Commodity Futures Trading Commission (CFTC) has asserted “exclusive jurisdiction” over prediction markets and filed court briefs supporting Kalshi’s position as a derivatives platform rather than a gambling operator. However, casino operators and tribal groups have lobbied Congress to strip sports-event contracts from CFTC oversight via amendments to federal legislation.
In Europe, the European Securities and Markets Authority (ESMA) recently warned that many event contracts offered by prediction markets may already fall under existing bans on binary options for retail investors. ESMA clarified that products marketed as “event contracts” can still be regulated as financial instruments if they feature binary outcomes and fixed payouts—regardless of branding or intent.
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Why It Matters: Market Growth Meets Legal Risk
Market appetite for prediction products is rising fast. In June 2026 alone, Kalshi posted nearly $9.4 billion in trading volume according to DefiLlama data—a jump from $5.3 billion just one month earlier. Polymarket International also saw volumes rise from $3.5 billion in May to roughly $4.3 billion in June, propelled by high-profile events like the FIFA World Cup.
Yet this growth is shadowed by mounting legal uncertainty. During Canada’s Round of 16 World Cup match against Morocco, over $48 million changed hands on Kalshi and nearly $27 million on Polymarket for just that single event—demonstrating both scale and exposure to regulatory scrutiny.
North Carolina’s legislature is preparing a budget bill that would impose a 6% tax on prediction market revenue while raising taxes on sportsbooks—a sign that states are eager not only to control but also profit from this booming sector.
Legal Uncertainty Hampers Market Expansion
As reported by coindesk.com, wallet tracing leaves significant data gaps: Allium could identify country origins for only about 6% of Polymarket’s political-market wallets, making enforcement patchy at best.
Meanwhile, ESMA’s reminder that many event contracts already face EU retail bans adds another layer of complexity for operators seeking international growth. Even when regulators do not introduce new rules, their statements can chill innovation or prompt platforms to restrict access preemptively.
With federal agencies and state governments taking divergent approaches—and with billions at stake—the future shape of prediction markets remains deeply uncertain.
Signals to keep an eye on
Kalshi may face legal trouble in Nevada if it fails to geofence its business by a court-imposed deadline, which would immediately expose the platform to enforcement actions in that state; whether or not Kalshi complies remains unclear following the Nevada Supreme Court's denial of its emergency motion on Wednesday.
