The Commodity Futures Trading Commission (CFTC) has issued new interpretative guidance, compelling registered prediction market operators to remove geographic access restrictions in all states within 30 days, despite existing state court orders imposing such geofencing. This move puts platforms like Kalshi and Polymarket in direct conflict with legal rulings in states such as Michigan, Nevada, and Washington, which have mandated geoblocking.
What Happened
On November 5, the CFTC released new guidance asserting that its “impartial access” requirements for registered designated contract markets (DCMs) mean these firms must not restrict residents in specific states from accessing their products. The federal commission has given DCMs a 30-day ultimatum to lift all domestic geographic restrictions that violate these fair access requirements, or provide a written explanation for their inability to comply. This directive also extends to partner intermediaries, requiring them to adhere to the same guidance.
CFTC Chairman Michael Selig stated, “Derivatives markets must operate on a uniform basis at a national scale in order to achieve the purposes set out in the Commodity Exchange Act. Geographic access restrictions are inconsistent with those purposes and the Act’s impartial access requirements.” He further emphasized that the guidance ensures “competitive, open, fair, and impartial access to their members pursuant to CFTC regulations.”
Key Details
- The CFTC issued its directive on November 5, giving prediction market operators 30 days to comply.
- The guidance mandates the removal of all domestic geographic restrictions that violate “impartial access” requirements.
- States including Michigan, Nevada, and Washington have court orders imposing geofencing restrictions on platforms like Kalshi and Polymarket.
- This is not the first instance where the CFTC has instructed its registrants to potentially defy state court orders; a similar situation occurred in July.
- The U.S. Court of Appeals for the Ninth Circuit had previously rejected Kalshi’s argument that it could not satisfy both Nevada geofencing orders and federal uniform access requirements simultaneously, calling it a “false, all-or-nothing proposition.”
- On the day before the CFTC guidance, the Ninth Circuit also ordered Kalshi to geofence contracts in California to prevent access on tribal lands.
- Companies such as Kalshi, Polymarket, and Crypto.com have previously taken sports event contracts offline in certain states due to court directives.
Why It Matters
This latest CFTC guidance creates a significant legal dilemma for federally regulated prediction market exchanges, forcing them into a direct confrontation with state court orders. By insisting on a “uniform basis at a national scale,” the CFTC is effectively overriding state-level judicial decisions, raising questions about the jurisdictional boundaries between federal and state regulatory bodies. This conflict could lead to renewed legal challenges and force prediction market operators to choose between complying with federal directives and defying state courts, or vice-versa, potentially exposing them to penalties from either authority. The situation also highlights the ongoing tension in regulating nascent markets like prediction platforms, particularly when federal and state interpretations of access and regulation diverge.