(author: Nick Claassen)
On November 24, 2025, the United States Commodity Futures Trading Commission (“CFTC”) issued an amended designation order authorizing Polymarket, a crypto-based prediction trading platform, to provide U.S. customers with access to event-based trading contracts through intermediaries registered with the CFTC.
Polymarket was initially launched in 2020 as a crypto-native blockchain-based prediction platform allowing users to trade binary event contracts; essentially, buying a “yes” or “no” position on future event outcomes (Polymarket contracts have since expanded to include scalar and category-based options). In January 2022, the CFTC charged the platform’s parent company with offering event-based over-the-counter swaps without registering as a designated contract marketplace or swap execution mechanism under the U.S. Commodity Exchange Act (“CEA”). The enforcement action resulted in a $1.4 million civil monetary penalty and a cease and desist order that forced Polymarket to block U.S. users. Since the settlement action, Polymarket has taken significant steps to bring its operations into compliance with the CEA, including through the July 2025 acquisition of QCEX, a CFTC-approved exchange and clearinghouse. The amended order now allows Polymarket to quote and clear event-based derivative contracts for U.S. participants exclusively through CFTC-registered futures commission merchants (“FCMs”) and other regulated intermediaries. Pursuant to the Order, trading activity must occur within a framework regulated by the CFTC that includes mandatory requirements for clearing, settlement, reporting, recordkeeping, market surveillance and risk management.
The CFTC’s decision is an important step for event-based prediction markets, and particularly for crypto-native platforms like Polymarket, but time will tell whether it serves as an indicator of broader acceptance of the crypto industry by US regulators. Cryptocurrency exchanges and market participants have historically been subject to intense scrutiny from the U.S. Securities and Exchange Commission (“SEC”), a challenge compounded by the underdeveloped and unclear laws and regulations governing these new financial instruments and technologies. The SEC’s jurisdiction over crypto exchanges depends on its past determinations that crypto tokens are properly classified as securities based on all four prongs Howey test used by courts and regulators to determine investment contract status. The CFTC, in turn, exercises primary federal authority over commodities, as well as futures, derivatives, swaps, markets, and the market professionals who trade them.
A full discussion of the distinction between securities and commodities contracts under U.S. laws, or the potential application of gaming laws, is beyond the scope of this article, but event-based contracts in commerce and crypto fall within the CFTC’s jurisdiction. Regarding digital assets more generally, there have been recent efforts to shift more oversight of digital tokens and associated markets to the CFTC, including in the House’s passage of the July 2025 CLARITY Act and in the November 2025 discussion proposal introduced by Senators Booker and Bozeman of the Senate Agriculture Committee. Bifurcation of crypto regulation and enforcement, many believe, could more appropriately match the CFTC’s regulatory core competencies in the commodities and derivatives markets with the economic realities of many types of digital assets, while allowing the SEC to focus on tokenized securities and other digital assets that align with a disclosure-based oversight regime and its Project Crypto initiative. It could also allow for additional oversight and enforcement of investor protection and anti-fraud laws, and perhaps prompt a clearer set of rules regarding transparency, oversight, and behavioral standards for crypto market intermediaries. It remains to be seen whether Polymarket’s decision will impact other crypto exchanges and markets, but the CFTC’s willingness to guide a company from a sanctioned outlier to a fully regulated market participant is a welcome development.
