Regulated vs Offshore Prediction Markets
Definition
Regulated prediction markets are venues registered with a national regulator, in the US a CFTC-designated contract market, operating under published rulebooks, surveillance and customer-protection rules. Offshore prediction markets operate outside that framework, often on blockchains, governed by their own terms of service. The same brand can run both.
Why it matters
Venue choice decides who supervises the market, who holds the money, how disputes are settled and whether a trader is allowed to use it at all. Investors should confirm the entity, its regulator, custody and resolution model, and their own eligibility before depositing, and never use tools to bypass geographic restrictions.
Common misconceptions
- •Same brand, different venue, different protections.
- •Self-custody is not insurance; lost keys mean lost funds.
- •A regulated venue can still carry custody limits, such as omnibus accounts without guaranteed deposit insurance.
- •The label is only a starting point. Investor outcomes usually depend on the governing documents, cash-flow priority, valuation policy, disclosure quality, and manager discretion surrounding the term, not just the shorthand definition used in marketing materials.
Technical details
Comparison (sources as dated)
Kalshi: CFTC DCM; clears through Kalshi Klear; USD custody in an omnibus account; resolution by the exchange under its rules.
Polymarket US (QCX LLC): CFTC DCM since July 9, 2025; USD accounts; rule-based resolution (Polymarket review, August 2026).
Polymarket international: non-custodial, pUSD on Polygon, UMA resolution, 40 countries including the US blocked (help center, read 2026-11-06).
How investors apply the term
Investors usually apply this term by tying the definition back to the controlling documents and then asking which cash flows, rights, restrictions, or valuation assumptions it changes. A useful review looks at the term alongside fees, leverage, liquidity, reporting frequency, and manager discretion rather than treating it as a standalone concept.
The practical diligence test is simple: identify who benefits if the assumption is wrong, who has control when conditions change, and what evidence the investor receives after closing. Terms that cannot be reconciled to documents, cash movements, and monitoring data should be treated as marketing shorthand until proven otherwise.
Frequently asked questions
- Do all prediction markets offer the same legal and custody protections?
- No. A US DCM such as Kalshi must follow CFTC core principles and offers complaint routes to the exchange, the NFA and the CFTC. Polymarket's international venue is 'non-custodial': users hold their own keys, and 'losing your private key or passwords can result in losing access to your funds.' AltStreet's Polymarket review describes it as 'protected by no regulator, no insurance, and an admin pause gate on the wrap/unwrap contracts.'
- Who can use the offshore venue?
- Not US residents, among others. Polymarket's geographic restrictions list 40 fully blocked countries, including the United States, the United Kingdom, France, Germany and Australia, regions such as Ontario and Quebec, and 'close-only' countries such as Singapore and Poland, where users can close but not open positions. It 'strictly prohibits the use of VPNs.' Polymarket settled with the CFTC in January 2022 for $1.4 million over operating an unregistered event-binary facility, which required it to block US users.
- How do resolution and settlement differ?
- Regulated venues resolve under their rulebook and contract terms; Polymarket's international markets resolve through UMA's oracle, with disputes decided by token-holder votes. AltStreet's Polymarket review (August 2026) found that 'Polymarket' is two venues: an international crypto exchange settling in pUSD with UMA resolution, restricted in the US, and Polymarket US, operated by QCX LLC, a CFTC-designated contract market since July 9, 2025, which relaunched US trading on December 2, 2025; the two Polymarket venues have different fees, custody and resolution.