Prediction Market License

What is a prediction market license?

A prediction market is an exchange where traders buy and sell contracts on the outcome of a real-world event. The "license" is the registration or authorisation that lets your platform operate under a chosen regime, not a single permit. The distinction matters: an event contract is not a gambling wager, and a prediction market is neither a bookmaker nor a binary-options shop.

Are prediction markets legal?

Yes, in the right setup. In the United States they are legal on exchanges supervised by the CFTC, but the rules depend on the jurisdiction and the type of contract. Sports contracts in the US are contested: in April 2026 the Third Circuit Court of Appeals sided with Kalshi on federal preemption of state law, but several states disagree and a Fourth Circuit appeal is pending.

Gibraltar is worth naming because it did something no other jurisdiction has: it created a standalone regime that treats prediction-market activity as neither betting, gaming nor a securities registration. It is a licensed home base, not a passport into other markets. This is a route we file directly.

Liberia added another licensed base for operators who want one integrated permit. In February 2026 its National Lottery Authority authorised prediction markets under the country's International Gaming Licence, covering yes-or-no contracts on sports, economics, weather and politics, for both B2C and B2B models. It is an offshore-style home base, not automatic access to restricted markets. This is a route we file directly.

Which prediction market license do you need?

You pick the route by two things: which country your users are in, and whether contracts settle in crypto or fiat. A US audience points to a CFTC-regulated exchange. Crypto settlement in the EU points to MiCA; a financial-instrument contract points to MiFID II. Crypto-native operators wanting a base often go offshore with a VASP. A US consumer product may use the sweepstakes model.

Not sure which route fits your markets? Tell us where your users are and how contracts settle, and we'll map it with you. Contact us.

How are prediction markets regulated in the United States?

In the US, prediction-market contracts are regulated by the CFTC as event contracts, a type of swap, under the Commodity Exchange Act, and must trade on a Designated Contract Market (DCM). This area is moving fast: the CFTC issued a proposed rule on 10 June 2026 to review event contracts contract-by-contract, and a federal preemption conflict with individual states is unresolved.

CFTC-regulated exchanges (DCM route)

Kalshi is the clearest example: it operates as a CFTC-regulated DCM, the same supervision level as exchanges like the CME. DCM registration is a heavy federal process, with capital, supervision and KYC/AML obligations, and it is not a service we file. We explain the route so you can scope it. Polymarket sits on the other side of the line: historically offshore, it is returning to the US by acquiring QCEX, itself a CFTC-regulated DCM.

Sweepstakes / no-purchase model

For some consumer products, operators use a no-purchase sweepstakes model in the US as an alternative to standing up a full DCM. Treat it carefully: legality varies by state law, so it is not a universal workaround. This is an area we help structure directly. See our Sweepstakes Casino page for how the no-purchase model works in practice.

How are prediction markets regulated in the EU?

The EU has no single answer and no market-wide passport for this vertical. Classification branches three ways. Crypto-settled markets fall under MiCA, requiring CASP authorisation. Contracts that qualify as financial instruments fall under MiFID II. Some member states treat the activity as gambling, requiring a local licence.

On 3 July 2026 ESMA stated that event contracts qualifying as financial instruments are derivatives caught by the binary-options retail marketing ban. Separately, in June 2026 nine European gambling regulators, including those in France, Germany and the Netherlands, signed a joint declaration to coordinate enforcement against unlicensed prediction-market platforms. Do not plan around a single EU entry point; there is none for this product.

Can you run a prediction market offshore?

Yes. Crypto-native prediction markets are often structured offshore with a VASP registration, and this is a route we handle directly. Be clear on the limits. Banking and PSP relationships sit in high-risk territory, and you will need geo-blocking for markets where the product is restricted. Offshore structuring gives you a licensed base to operate from; it does not open every consumer market by itself. See our high-risk banking page for how payment access works for this profile.

This is the route we run most often. Tell us your model and we'll scope the offshore structure and banking together. Contact us.

Prediction markets vs sports betting vs gambling

A prediction market is not a sportsbook and an event contract is not a gambling wager. On a prediction market you trade against other traders on an exchange; in sports betting you bet against the house. That difference in legal classification is why this page is not a "gaming" product.

Advantages of a licensed prediction market

A regulated setup unlocks things an unlicensed one cannot.

• Access to banking and PSP relationships that will not touch an unlicensed prediction market.

• Legal status and the trust that comes with a named regulator behind you.

• Access to US users at federal scale through a CFTC-regulated DCM.

• A route into institutional liquidity as the sector matures; prediction-market trading volumes have grown quickly around high-profile political and sports events.

Disadvantages and risks

The risks are real and route-specific. Regulatory uncertainty is the biggest: US sports contracts are caught in an unresolved federal-vs-state dispute. The DCM threshold is high on capital and supervision. Banking and PSP access is difficult under high-risk conditions. And misclassifying the product, for example treating a financial-instrument contract as something else, exposes you to enforcement and penalties.

• Regulatory uncertainty, especially the US state dispute over sports contracts.

• High capital and supervision threshold for the DCM route.

• Banking and PSP friction under high-risk classification.

• Enforcement and penalty risk if the product is classified incorrectly.

Why choose MGL

We handle the routes that make sense for most operators entering this vertical: offshore and crypto-native structuring, the sweepstakes model, company incorporation, high-risk banking and the compliance programme around all of it. For the US DCM route, we tell you plainly what it takes and where the federal line sits, rather than selling you a filing we do not do. Our value here is matching the route to your model and markets, and being straight about what a given authorisation does and does not open.

Tell us your target markets and settlement model. We'll come back with the route that fits and a straight answer on what we do and don't handle. Contact us.