Political prediction markets are the fastest, most accurate way to see what the crowd truly believes about an election, and after a landmark run of federal court decisions, they are now legal for United States residents to trade with real money. If you have wondered how to bet on elections legally in 2026, the short answer is this: use a CFTC-regulated exchange like Kalshi, or, if you can access it, the offshore crypto exchange Polymarket. This guide walks through exactly how these markets work, what changed in the law, and how to place your first trade with confidence.
Are Political Prediction Markets Legal in the United States?
Yes. As of 2026, US persons can legally trade political event contracts on Kalshi, a fully regulated Designated Contract Market (DCM) under the Commodity Futures Trading Commission. The turning point came in October 2024, when the DC Circuit Court of Appeals denied the CFTC’s motion to block Kalshi’s congressional control contracts. Trading of federal election markets began that same week, and by the 2024 general election Kalshi had settled hundreds of millions of dollars in political contract volume without incident. In 2025 and 2026 the CFTC formally dropped its appeal, and every subsequent election cycle has traded openly on the platform.
Polymarket, which uses USDC on the Polygon blockchain, is technically not licensed for US retail users following its 2022 CFTC settlement, but it remains the deepest global pool of political liquidity and is widely used internationally. In July 2025 Polymarket acquired the CFTC-registered exchange QCEX, and a compliant US relaunch is expected before the November 2026 midterms.
How Political Prediction Markets Actually Work
Each market is a binary contract that resolves to $1.00 if the event happens and $0.00 if it does not. The live price, quoted between 1 cent and 99 cents, represents the market-implied probability of the outcome. A contract trading at 62 cents means the market thinks there is a 62 percent chance the event occurs. Buy it, hold to resolution, and you make 38 cents on every dollar of upside if you are right, or lose your 62 cents if you are wrong.
You do not have to hold to expiration. Contracts trade continuously, so most active users treat them like miniature stocks, buying when they think the odds are wrong and selling when the price moves their way. Fees are minimal: Kalshi charges roughly 1 to 7 cents per contract depending on price and volume, while Polymarket takes no trading fee and earns only on the spread.
The Main Types of Political Contracts
- Presidential race markets. Winner-take-all contracts on the next president, plus separate markets for each nominee and the popular vote margin.
- Congressional control. Which party controls the House and the Senate after the next election, priced separately.
- Individual Senate, House, and gubernatorial races. Currently offered on Kalshi for roughly 60 competitive seats each cycle, with volume concentrated in the top 15 tossups.
- Primary and nomination markets. Who wins each party’s nomination, active more than a year before Election Day.
- Policy and event contracts. Will a specific bill pass by year-end, will a Supreme Court justice retire, will a cabinet nominee be confirmed. These fill in the calendar between elections.
Kalshi vs Polymarket for Election Betting
| Feature | Kalshi | Polymarket |
|---|---|---|
| US legal status | Fully regulated (CFTC DCM) | Restricted to non-US users (US relaunch pending) |
| Funding | ACH, wire, debit card in USD | USDC on Polygon |
| Federal election markets | Yes | Yes |
| Individual state races | Yes, roughly 60 per cycle | Yes, on the biggest races |
| Typical spread on major markets | 1 to 2 cents | 0.5 to 1 cent |
| Trading fee | 1 to 7 cents per contract | Zero (spread only) |
| Tax reporting | 1099-B issued | Self-report |
The practical takeaway: US traders should start with Kalshi. It is legal, dollar-denominated, and issues tax forms. Polymarket remains the reference price for anyone comparing markets, and its liquidity in the biggest races is still the deepest in the world.
How to Place Your First Election Trade
Sign up on Kalshi with an ID verification (required by the CFTC). Fund the account with an ACH transfer, which typically settles same-day. Open the Politics section, pick a race, and study the current price. If a Senate contract shows a Democratic candidate at 44 cents and your read of the polls, fundraising, and district history suggests something closer to 55 percent, that is an 11-cent edge, roughly a 25 percent expected return if you are right about the true probability.
Size positions small at first. A useful rule: never risk more than 2 percent of your bankroll on a single binary contract, no matter how confident you feel. Political markets can move violently on debates, indictments, and October surprises. Keeping position sizes disciplined is what separates traders who compound from those who blow up.
Taxes and Recordkeeping
The IRS treats Kalshi event contracts as Section 1256 contracts, which means gains and losses are marked to market at year-end and split 60 percent long-term, 40 percent short-term, regardless of holding period. That is a meaningful tax advantage over traditional sports betting, where winnings are taxed as ordinary income and losses are only deductible if you itemize. Polymarket users must self-report crypto-denominated gains, generally as short-term capital gains or, for high-volume traders, as trader income.
Strategies Serious Traders Use
- Fade the news reaction. Prices routinely overshoot on a single headline. If a candidate drops 8 cents on a poll from a low-quality pollster, that is often a fade opportunity.
- Trade correlated markets. A Senate control contract is a weighted average of the individual seat contracts. When the two disagree, one is mispriced.
- Watch fundamental drivers. Fundraising reports, incumbent approval, and the generic ballot move markets more reliably than any single poll.
- Respect resolution risk. Read the exact contract wording. Some contracts resolve on when a race is called by the AP, others on the certified vote, and the difference can be days of trading and cents of edge.
Ready to Trade the 2026 Midterms?
The 2026 midterms are already the most heavily traded non-presidential election in prediction market history, with Kalshi and Polymarket collectively pricing hundreds of Senate, House, and gubernatorial contracts. If you want a legal, regulated way to put your read on politics to work, open a Kalshi account and start with the congressional control markets. For a global view and the deepest liquidity on flagship races, check Polymarket. And for a side-by-side comparison of every major platform, see our updated best prediction markets rankings.