Regulated, But Still Risky? Inside Polymarket’s CFTC-Approved Return to the U.S.

TL;DR

• Polymarket’s U.S. comeback is fully regulated under a CFTC-designated exchange and clearinghouse but abandons the on-chain model that built its reputation.
• The U.S. app is sports-only, centrally intermediated, and far less transparent, raising new risks around liquidity, execution and internal market-making.
• Federal approval does not override state restrictions, meaning access, obligations and user protections still vary widely across jurisdictions.

Polymarket is officially back in the United States, nearly four years after the CFTC forced it to geoblock American users and pay a $1.4 million penalty for operating an unregistered derivatives venue. With the CFTC approval now in place, Polymarket is relaunching through a newly acquired exchange and clearinghouse that sit directly under the U.S. futures regime. But this comeback involves a fundamental shift: the U.S. product is not on-chain, abandoning the model that made Polymarket synonymous with transparent, smart-contract-driven prediction markets. The result is a platform that is legally compliant yet structurally closer to a traditional derivatives venue. One where key risks persist, and some become harder to monitor.

From Enforcement to a Federal Green Light

Polymarket’s path back to the U.S. began with its 2022 enforcement case. The CFTC viewed its on-chain markets as real-money event-based derivatives, which must be offered by a registered exchange. After settling the case and blocking U.S. users, Polymarket spent years restructuring the business around a regulated framework.

The turning point was the acquisition of a CFTC-registered exchange and clearinghouse. The amended order granting Designated Contract Market (DCM) status brought Polymarket into the same legal category as CME and ICE, enabling it to list event contracts for U.S. customers. But this regulatory pivot came with a major trade-off: Polymarket could not simply port its on-chain system into a DCM environment. Smart contracts, wallet-based trading, and public settlement flows are incompatible with U.S. derivatives rules.

Under the new model, U.S. users interact with a fully intermediated structure. Brokers and futures commission merchants (FCMs) handle KYC, custody, reporting, and market surveillance. The platform’s liquidity and matching engine operate off-chain. This reshaped Polymarket compliance structure is what unlocked the CFTC approval. However, it also severs the open, verifiable architecture that defined the original platform.

The New Product: Sports-Only, Off-Chain, and Highly Controlled

The Polymarket U.S. app is rolling out gradually, first to waitlisted iOS users. At launch, the offering is limited to sports markets. Political, macro, and entertainment markets, core drivers of Polymarket’s global popularity, will come later, if regulators permit.

Just as important as what the app offers is how it operates. The U.S. version does not live on Polygon, does not settle via smart contracts, and does not expose liquidity on-chain. Instead, it functions like a conventional event-trading platform under U.S. derivatives law. Trades settle in USDC, but that is where the crypto-native experience ends.

For a company known for decentralization, transparent on-chain order books, and verifiable market logic, this shift is significant. The off-chain U.S. model removes the ability to independently audit liquidity flows, market-maker behavior, or settlement outcomes. That may satisfy regulators, but it changes the informational landscape for users accustomed to on-chain visibility.

Prediction Markets Are Growing Up—But Not Without Frictions

Polymarket relaunches at a time when prediction markets are experiencing their strongest momentum yet. Platforms are reporting multi-billion-dollar monthly volumes, institutional investors are entering the space, and competitors like Kalshi are expanding into mainstream distribution channels. The industry is no longer a crypto side experiment; it is becoming a regulated segment of retail derivatives.

This sector evolution explains why the CFTC regulated prediction markets framework is emerging now. Regulators are responding to market growth rather than driving it. But growth also intensifies competition. The Polymarket vs Kalshi dynamic is increasingly defined by distribution, compliance architecture, and access to U.S. flow rather than product design. Truth Social’s planned “Truth Predict” adds another entrant targeting political forecasting, raising the stakes for which platform will control liquidity when election markets return.

Yet while competition is increasing, the U.S. product architectures are converging toward centralized, intermediated systems. If prediction markets are “growing up,” they are also shedding some of the transparency that originally distinguished them.

>>> Read more: Polymarket U.S. Relaunch Is Underway

Where Regulation Ends and Transparency Risks Begin

Federal oversight is a major milestone, but it does not eliminate all risks. In some cases, the shift off-chain introduces new ones.

One of the more significant issues is the emergence of internal liquidity provision. Reports indicate that Polymarket is hiring an in-house trading team to participate in its own markets. In an on-chain environment, such activity would be visible through public addresses and transaction logs. In the new U.S. architecture, this activity happens inside a closed system. That raises the classic trading against customers risk, where a venue operator or its affiliates may have superior information or execution advantages.

Even the perception of this can undermine trust. Prediction markets rely heavily on user confidence that odds reflect aggregated sentiment rather than platform-driven positioning. Centralizing liquidity and removing on-chain transparency makes it harder to distinguish between fair market-making and potential conflicts.

These concerns intersect with broader conflict-of-interest concerns, including the large market speculating on Polymarket’s own success or failure. Self-referential markets are not inherently improper, but on an off-chain venue, users lack visibility into participant composition, liquidity concentration, and execution pathways. The informational asymmetry grows, and so does the potential for misaligned incentives.

Oracle and settlement risk also take on new forms. While DCM rules mandate clear contract specifications and dispute processes, U.S. settlement relies on centralized market adjudication rather than decentralized oracles. For users accustomed to transparent on-chain resolution, this is a meaningful shift.

The Legal Patchwork: Federal Approval Doesn’t Settle Everything

The commission’s green light addresses federal derivatives requirements, but prediction markets still sit in a gray zone between financial regulation and gambling law. The CFTC approval resolves only the federal component of Polymarket’s regulatory status. There remains a separate layer of state-level restrictions that the platform must still navigate. Several states interpret real-money outcome trading as sports betting. Others view it as a financial activity. This ambiguity means that federal approval does not guarantee universal access.

This complexity feeds a recurring user question: Is Polymarket legal in the U.S. everywhere? The short answer is that federal approval enables national operations, but some states may still impose restrictions, especially as the platform expands beyond sports. Navigating state gambling law vs prediction markets requirements will be a continuing challenge for the industry.

What U.S. Users Should Watch

For retail traders, the U.S. relaunch offers legitimacy but not simplicity. Even with the CFTC approval in place, Polymarket users should not assume that regulatory authorization eliminates operational risks or information gaps. Liquidity depth, market definitions, settlement rules, and regional access still vary. More importantly, the off-chain model reduces transparency around liquidity flows, market-maker identities, and execution quality. Users should also watch how the platform handles disclosures around internal trading activity, conflicts, and market surveillance. The lack of on-chain visibility places more weight on Polymarket’s governance practices.

A Milestone for Prediction Markets, But Not a Replication of the Original Vision

CFTC approval is a meaningful achievement for Polymarket. It shows that a crypto-native company can rebuild itself within the U.S. regulatory perimeter and regain access to the world’s largest derivatives market. But the U.S. app is not a regulated version of the original on-chain platform. It is a different system entirely, trading transparency and decentralization for compliance, intermediated access, and regulatory alignment.

>>> Read more: CFTC-Approved Spot Crypto Trading: What the New Market Means

Whether this model can deliver the same trust and informational clarity that made Polymarket successful offshore remains an open question. As prediction markets continue to institutionalize, the challenge will be balancing regulatory requirements with the transparency users expect from crypto-native platforms. Polymarket’s U.S. relaunch is an important step. In addition, it marks the beginning of a new phase where regulation and opacity coexist, and where user trust must be rebuilt under a different set of rules.