KYC

KYC exists at the intersection of Anti-Money Laundering (Anti-Money Laundering) obligations and consumer protection rules. A CFTC-Regulated Exchange must be able to identify every participant, ensure they are not subject to sanctions, and report suspicious activity to financial authorities. Without KYC, a prediction market could inadvertently allow money laundering through high-volume trading followed by clean withdrawals. Beyond regulatory compliance, KYC also enforces Geofencing restrictions — Kalshi, for instance, is only available to US residents and must confirm residency at signup. The process also prevents underage users from accessing the platform, a condition of the Designated Contract Market operating license.

On Kalshi, KYC is initiated at account creation. The user provides personal details including their Social Security Number, which the platform checks against identity databases. They then upload a photo of their government-issued ID (passport or driver's license) and take a live selfie. Facial recognition software compares the selfie to the ID photo to confirm the person creating the account is the document owner. This automated process resolves in minutes for most applicants. A small percentage of applications with ambiguous results go to manual human review. Once approved, KYC status persists for the life of the account unless the user triggers a re-verification event such as a name change or address update.

Traditional Decentralized Prediction Market platforms like Polymarket prior to 2026 did not require KYC — users connected a Crypto Wallet and traded pseudonymously. This was both a feature (privacy, permissionless access) and a regulatory liability. After Polymarket obtained its US operating license and relaunched for American users in May 2026, it introduced KYC for those users to satisfy CFTC requirements, while maintaining non-US access under a separate compliance framework. The tension between the privacy ethos of decentralized platforms and the identity requirements of regulated finance remains an active area of debate as CFTC rulemaking for prediction markets continues to evolve in 2026.