- Polymarket filed an application with the National Futures Association on July 3 to operate as a futures commission merchant through its affiliate Coming Home GBA LLC, seeking regulatory approval to offer margin trading in the US — a move that would allow users to open prediction market positions without putting up the full collateral amount, attracting institutional investors for whom capital efficiency is a prerequisite for meaningful participation; a Polymarket representative confirmed the FCM application, while CFTC and NFA representatives did not immediately comment.
- Polymarket must obtain separate CFTC approval for changes to its rulebook that would allow non-fully collateralized trading — the two-track regulatory process (NFA for the FCM license, CFTC for rulebook changes) reflects the unusual position prediction markets occupy at the intersection of futures regulation and event-based contracts; the CFTC is already conducting a broad probe into Polymarket’s operations, making the regulatory relationship unusually complex for a company simultaneously seeking approvals and under investigation.
- Kalshi got its own FCM license earlier this year and launched perpetual futures — a crypto-market derivative structure where contracts don’t expire but track an underlying asset’s current price — racking up more than $5.5 billion in trading volume within two weeks of launch; Polymarket’s FCM application follows the same playbook, and both companies are betting that institutional adoption requires the capital efficiency of margin trading and the continuous exposure of perpetual contracts rather than fully-collateralized binary bets.
- The margin trading push comes as prediction markets face intensifying regulatory and public scrutiny over insider trading: Polymarket’s public blockchain ledger makes individual bets visible and traceable, and unusually well-timed trades around political and policy events have drawn scrutiny from lawmakers; US regulations would require users accessing margin products to undergo additional identity checks including employer information — requirements that create friction with the pseudonymous culture of prediction market platforms but that regulators see as essential for a product class with demonstrated insider-trading vulnerabilities.
What Happened?
Polymarket filed an application on July 3 through its affiliate Coming Home GBA LLC to become a registered futures commission merchant, a prerequisite for offering margin trading in the US. The company must also win CFTC approval to amend its rulebook to allow non-fully collateralized positions. The move follows Kalshi’s successful FCM licensing earlier this year and the subsequent launch of perpetual futures that generated $5.5 billion in volume in two weeks. Polymarket, which set a record of more than $4 billion in weekly notional volume in June, is pursuing the institutional market as the next growth frontier.
Why It Matters?
Prediction markets have grown from a niche political novelty into one of the fastest-growing segments of finance, but their current fully-collateralized structure limits participation from institutional investors who manage capital across dozens of simultaneous positions. Margin trading would be transformative for institutional adoption: a hedge fund that can express a view on an Iran deal probability or a Fed rate decision with 10x leverage via a prediction market perpetual future has a very different cost structure than one that must post full collateral for each binary bet. The regulatory question is whether the CFTC will approve margin for an asset class that has already demonstrated insider-trading vulnerabilities — the political heat around prediction market manipulation makes this a non-trivial approval, not a formality.
What’s Next?
The CFTC’s ongoing broad probe into Polymarket creates an unusual dynamic: the company is simultaneously seeking regulatory approvals and under regulatory investigation, which could slow or complicate the FCM licensing process. Watch for whether the NFA approves the FCM application before the CFTC resolves its probe. Kalshi’s perpetual futures volume ($5.5B in two weeks) will be the benchmark Polymarket uses to justify its own margin trading ambitions — if that volume sustains, it strengthens the business case; if it proves to be novelty trading that fades, the regulatory cost-benefit calculus for CFTC approval shifts.
Source: Bloomberg
