Honestly, if you asked this question a couple of years ago, the answer was a flat "yes" for almost everyone in the U.S. unless you were using some shady offshore site or a VPN to trick a server in Curacao. But things have changed fast. Like, really fast. As of 2026, the legal landscape for betting on the presidential election is basically a different world than it was during the 2020 or even the early 2024 cycle.
Whether it's legal for you right now depends entirely on how you’re doing it and where you’re standing.
For decades, the Commodity Futures Trading Commission (CFTC) fought tooth and nail to keep "election gambling" off U.S. soil. They argued it would hurt the integrity of democracy. They called it "gaming" and said it served no public interest. But then a company called Kalshi sued them. And won.
That win in late 2024 cracked the door open, and since then, the floodgates haven't just opened—they've been ripped off the hinges.
The Big Shift: Prediction Markets vs. Sports Betting
You've gotta understand the distinction here because it’s why some apps are legal and others are blocked. Technically, you aren't "betting" on a game; you're trading "event contracts."
It sounds like fancy Wall Street talk, but it’s the legal loophole that makes it all work. Platforms like Kalshi, Interactive Brokers (ForecastEx), and more recently, the U.S.-regulated version of Polymarket, treat an election outcome like a commodity. You buy a contract that says "Candidate X wins." If they win, the contract pays out $1.00. If they lose, it goes to zero.
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Because these are regulated as derivatives by the CFTC—rather than "gambling" by state gaming commissions—they've been able to expand into states where traditional sports betting is still a crime. For example, even in places like California or Texas where you can't legally bet on a Sunday night NFL game, you can often legally trade election contracts on a regulated exchange.
Why the CFTC finally gave up (sorta)
The courts basically told the regulators that they didn't have the authority to ban these markets just because they didn't like them. Judge Jia Cobb’s 2024 ruling was the turning point. She basically said the CFTC overstepped.
Now, in 2026, we have a new CFTC Chairman, Michael Selig, who has taken a much more "hands-off" approach. He’s essentially letting the markets run while the agency focuses on preventing "insider trading" by politicians. Because, yeah, imagine a Senator betting against their own bill. That’s the kind of stuff they're actually worried about now.
Is it actually "Illegal" anywhere?
It’s complicated. While federal law has smoothed out, some states are still grumpy about it.
- North Carolina: They have old statutes on the books (specifically General Statute 163-274) that technically make wagering on an election a misdemeanor.
- New York: They’ve been trying to pass the ORACLE Act, which would put strict limits on these markets because they don't want "Vegas on Wall Street."
- The "Offshore" Trap: This is where people still get into legal hot water. Using a VPN to access unregulated, offshore crypto-betting sites is still technically illegal in most jurisdictions. If the site doesn't have a CFTC license or a state gaming license, you're essentially in the Wild West. You have zero consumer protection if they decide not to pay out your $50,000 win.
The 2026 Rules: Taxes and Transparency
If you do decide to put money down, don't think Uncle Sam isn't watching. The IRS updated its rules for the 2026 tax year, and they are significantly stricter than they used to be.
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First off, the reporting threshold for "wagering transactions" (which now clearly includes many prediction markets) has been consolidated. If you win $2,000 or more, expect a Form W-2G.
But here’s the kicker that's catching people off guard this year: the 90% Loss Rule.
Starting January 1, 2026, the IRS changed how you can deduct losses. Previously, if you won $10,000 but lost $10,000, you broke even and owed $0. Now, you can only deduct 90% of your losses against your winnings.
Example: You win $10,000 on the midterms but lost $10,000 on a different primary race. Under the 2026 rules, you can only deduct $9,000. That means the IRS views you as having a "profit" of $1,000, even though your bank account is at zero.
It’s a brutal change for high-volume traders, and it’s something you definitely need to account for before you start "hedging" your bets.
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What Most People Get Wrong
People think these markets are just for degenerate gamblers. They're actually becoming "the" source for news.
During the last few cycles, the betting odds were often more accurate than the polls. Why? Because people are less likely to lie when their own money is on the line. If a pollster calls you, you might say you're voting for one person just to be polite or to mess with the data. If you’re putting $5,000 on a "Yes" contract, you're probably being a lot more honest with yourself about who is actually going to win.
However, there’s a dark side: Market Manipulation.
We've seen "whales" (traders with massive bankrolls) pour millions into a candidate just to move the odds and create a sense of momentum. It’s a legal grey area that the DOJ is still sniffing around.
Practical Steps If You Want to Bet
If you’re looking to get involved in the 2026 midterms or looking ahead to the next presidential run, don't just click the first ad you see on X (formerly Twitter).
- Check for a CFTC License: Use platforms like Kalshi, Interactive Brokers, or the regulated U.S. arm of Polymarket. If they don't ask for your SSN or tax info, they probably aren't legal in the U.S.
- Understand the "300x Rule": For tax purposes, the IRS usually triggers a W-2G if your win is over $2,000 and at least 300 times your bet. So, a massive long-shot win on a tiny bet is more likely to be flagged than a steady win on a large favorite.
- Check Your Local State Board of Elections: Even if the feds are cool with it, some states are still issuing "Cease and Desist" orders to prediction markets.
- Keep a Paper Trail: Since you can no longer deduct 100% of your losses, you need meticulous records (spreadsheets, screenshots, receipts) to ensure you aren't paying taxes on "phantom income" you never actually kept.
The days of "is it illegal" are mostly over. Now, the question is "how do I do it without getting crushed by the IRS or a state regulator?"
Your next move: If you're serious about this, open an account with a US-regulated exchange like Kalshi to see the current spreads. Unlike traditional sportsbooks, these markets let you see the order book, so you can see exactly how much "liquidity" is behind a certain candidate before you put your own money at risk.