The CFTC’s New Rulebook Doesn’t Reach a $34 Billion Offshore Prediction Market

§ 01 Executive Snapshot

• What: The CFTC released a new prediction market framework, which does not regulate offshore platforms like Polymarket.
• Who: CFTC, Kalshi, Polymarket, Crane & Zeng Consulting, Coalition for Prediction Markets.
• Why it matters: The regulatory gap may push users towards unregulated offshore platforms, undermining consumer protection efforts.

§ 02 Key Developments

• The CFTC's new framework spans 267 pages but does not address offshore prediction markets.
• Polymarket's estimated annual offshore volume generated by U.S. users ranges between $11–34 billion.
• The total offshore prediction market volume is estimated at $93.9 billion, compared to $74 billion on CFTC-regulated platforms.

§ 03 Strategic Context

• There is a significant disparity in growth rates, with CFTC-regulated platforms seeing an 866% increase from 2024 to 2025, while offshore platforms grew by 179%.
• The regulatory environment is evolving, with a clear focus on compliance for platforms like Kalshi, which may inadvertently favor unregulated competitors.

§ 04 Strategic Implications

• The immediate consequence may be a shift of U.S. volume towards unregulated platforms due to stricter rules on compliant players.
• Long-term, if current trends continue, U.S.-attributable offshore volume could reach $133 billion annually by 2030, indicating a growing challenge for regulators.

§ 05 Risks & Constraints

• Potential regulatory risks include failure to address offshore platforms leading to increased unregulated market activity.
• Competition from offshore platforms lacking restrictions may undermine the CFTC's consumer protection objectives.

§ 06 Watchlist / Forward Signals

• The CFTC is seeking public comment on the proposed rulemaking, which could signal future regulatory adjustments.
• Monitoring of offshore volume trends and user migration patterns will indicate the effectiveness of the new regulatory framework.