Key takeaways
State law: New Jersey, Illinois, Massachusetts, and several other states allow exchange wagering by a licensed operator, but the two state-licensed exchanges that launched aren’t operating anymore. Prophet Exchange closed in New Jersey in May 2024, and Sporttrade stopped taking bets in its five states in 2026.
Federal route: Peer-to-peer sports trading in the US now runs mostly through prediction markets regulated by the CFTC, such as Novig, ProphetX, and Kalshi. Their legality under state gambling law is being fought in court.
Offshore: Betfair and other foreign exchanges hold no US state license and aren’t registered with the CFTC, so they aren’t a legal option for US bettors.
Location: Like a sportsbook, a licensed exchange or prediction market checks where you’re located before it takes a trade.
What a betting exchange is
A sportsbook takes the other side of your bet and builds its margin into the odds. An exchange matches you with another bettor who wants the opposite side, and the operator earns a commission or fee instead of the vig. If you back a team at a price someone else will lay, the trade goes through, and the exchange never has a position in the game.
That’s why bettors look for exchanges, and it’s also why they’ve had a hard time under state law. State betting laws were written around sportsbooks that hold risk, and taxes on gross gaming revenue fall hardest on a business that lives on a thin commission.
Exchange wagering under state law
Several state sports betting laws name exchange wagering directly. New Jersey’s 2018 law defines a sports pool to include “exchange wagering” alongside parlays, moneylines, and other bet types (P.L. 2018, c.33). Illinois added exchange wagers on prediction markets and exchanges to its Sports Wagering Act in its 2026 budget. It taxes each one at 1.75%, rising to 3.5% after a platform’s first 5 million exchange wagers in a fiscal year. The CFTC and Kalshi both sued, and in October 2026 a federal judge blocked the state’s licensing and criminal provisions while the case continues. Massachusetts requires a licensed operator to get the Gaming Commission’s approval before offering exchange or other peer-to-peer wagering, and Vermont, North Carolina, and Connecticut define or regulate it as well.
In most of those states an exchange needs the same license as a sportsbook, and it pays the same kinds of fees and taxes. Two companies tried it:
Prophet Exchange launched in New Jersey in 2022 as a licensed exchange and closed its New Jersey operation in May 2024. The company came back under the ProphetX name with a different model.
Sporttrade launched in New Jersey in 2022 and later added Arizona, Colorado, Iowa, and Virginia. It stopped taking bets in all five states on May 25, 2026, and account access in the last four ended June 26. The company said state rules written for sportsbooks, liquidity split state by state, and licensing and tax costs made the exchange hard to scale.
The laws stayed on the books after both left. A licensed operator could still offer exchange wagering in those states with the regulator’s approval.
CFTC-regulated prediction markets
The other route runs through federal law. The CFTC designates exchanges, called designated contract markets, to list contracts on future events, and several of them list sports contracts that trade peer to peer. Bettors buy and sell yes or no contracts on a game’s outcome, and the price moves with supply and demand.
Both former state-licensed exchanges have moved this way. ProphetX received CFTC designation as a contract market and clearing organization on June 11, 2026. The CFTC lists Sporttrade DCM LLC as designated on October 30, 2026, and Sporttrade announced its exchange and clearing registrations on November 3, saying it would roll out in phases. Novig, run by Ludlow Exchange, LLC, was designated on June 16, 2026, and Kalshi and Polymarket US also list sports contracts.
The federal designation is what lets these markets operate across most of the country without a state sports betting license, and it’s also what states dispute. Many state regulators treat sports event contracts as unlicensed gambling, and the federal appeals courts are divided on whether federal law shields the platforms. The guide to who regulates sports prediction markets covers that split, and the crackdowns tracker lists each state action.
Fees differ by platform. Some charge a commission on winnings or a per-contract fee, and some vary by trade type. Novig charges no fee on pre-game straight trades, and its live trades, futures, and parlays carry a taker fee (fee schedule).
Offshore exchanges
Betfair, owned by FanDuel’s parent Flutter, is the best-known exchange in the world, and Smarkets and Matchbook operate abroad too. None holds a license from a US state sports betting regulator, and none is a designated contract market. Smarkets has applied: the CFTC lists a Smarkets Board of Trade Exchange application as pending since March 3, 2026. A US bettor who reaches one through a VPN or an offshore account has no regulator to go to if a payout is withheld, and the guide on how to check a sportsbook’s license explains how to tell a licensed operator from an unlicensed one.
The three routes compared
Route | Who regulates it | Where it’s legal | Operating examples, November 2026 |
|---|---|---|---|
State-licensed exchange wagering | State gaming regulator | States whose law allows it, such as New Jersey, Illinois, and Massachusetts | None; Prophet Exchange closed in 2024 and Sporttrade in 2026 |
CFTC-regulated prediction market | Commodity Futures Trading Commission | Most states under federal law; several states contest it | Novig, ProphetX, Kalshi, Polymarket US |
Offshore exchange | A foreign regulator | No US state | Betfair, Smarkets, Matchbook |
FAQ
Is Betfair legal in the US?
No. Betfair’s exchange holds no US state license and isn’t registered with the CFTC. Its owner, Flutter, operates in the US through FanDuel Sportsbook.
Is there a legal sports betting exchange in New Jersey?
New Jersey law allows exchange wagering, but both licensed exchanges that operated there have closed, Prophet Exchange in May 2024 and Sporttrade in May 2026. CFTC-regulated prediction markets still take New Jersey users, and the Third Circuit’s April 2026 ruling bars the state from enforcing its gambling law against Kalshi while that case continues.
Are prediction markets the same as betting exchanges?
They work the same way for the bettor, since you trade against other users rather than a house. The difference is legal: a prediction market is regulated by the CFTC as a designated contract market, while exchange wagering under state law needs a state sports betting license.
Why did Sporttrade stop taking bets?
Sporttrade said state rules written for sportsbooks, liquidity split state by state, and the cost of licensing and taxes made its exchange hard to scale. It left New Jersey, Arizona, Colorado, Iowa, and Virginia in 2026, and the CFTC designated its new exchange on October 30, 2026.
Do exchanges charge vig?
No. An exchange doesn’t set odds or build a margin into them. It earns money from a commission or fee on trades, and the amount depends on the platform.
You must be 21 or older to bet in most states. Gamble responsibly. If gambling stops being fun, call or text the national helpline at 1-800-MY-RESET (ncpgambling.org).