CFTC Tells Exchanges to End Geographic Restrictions, or Explain Why They Can’t

The Commodity Futures Trading Commission is telling federally regulated exchanges to stop blocking U.S. customers based on geography, as those restrictions violate its impartial-access requirements, or explain why compliance is not feasible.

The agency, or CFTC, issued an interpretation of Commission Regulation 38.151(b), which requires designated contract markets to provide competitive, open, fair and impartial access. Exchanges have 30 days to cease domestic geographic restrictions that violate those requirements or submit an explanation to the Division of Market Oversight.

The directive also reaches distribution partners. Within the same period, exchanges should ensure that intermediaries accessing their markets are not impeding compliance with the exchange’s impartial-access obligations, or explain why that is not feasible.

“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,” CFTC Chairman Michael Selig said. “Geographic access restrictions are inconsistent with those purposes and the Act’s impartial access requirements.”

The announcement puts federal access requirements directly against the state-by-state restrictions prediction markets have adopted under enforcement pressure. But it is an agency interpretation, not a court order vacating existing injunctions, and its explanation option matters for companies already facing judicial restrictions.

A 30-day requirement, not an automatic reopening

The release does not say that every geographic restriction must disappear immediately.

Its operative language applies to domestic restrictions that violate the impartial-access requirements. It gives exchanges a route to explain why compliance is not feasible and says the commission will consider “the facts and circumstances of any particular case” before potential action.

The interpretation targets designated contract markets, or DCMs, the federally registered exchanges listing the contracts. Its intermediary provision extends the compliance question to brokers and other businesses providing customer access.

That distinction matters because customers often encounter a prediction market through a separate app. Restricting access at the brokerage level can produce the same practical result as an exchange imposing the block itself.

The release does not establish that any named operator has violated the rule, announce penalties or confirm that previously restricted customers can resume trading.

Michigan shows why operators are geofencing

Michigan provides one of the clearest examples of how geographic restrictions developed.

Kalshi faces a state-court injunction restricting sports event contracts for people in Michigan, backed by geolocation requirements. Robinhood and Coinbase separately agreed to stop offering new sports contracts and close remaining positions while preserving their legal challenges.

As DeFi Rate reported on Robinhood’s withdrawal, those restrictions extended Michigan’s enforcement campaign beyond the exchange itself to businesses distributing its contracts.

These were not simply marketing choices to avoid an inconvenient state. They arose from court proceedings and agreements with regulators.

The CFTC’s new interpretation creates a federal compliance question for those restrictions. It does not state that the agreements or court orders have been dissolved.

For operators, the practical issue is whether to seek judicial relief, explain the restriction to the CFTC or take another legally supported step, not assume that an agency release grants permission to disregard a judge.

Utah’s prosecution has prompted broader withdrawals

Utah has produced a different, and particularly consequential, set of restrictions.

The state filed civil and criminal cases against Kalshi, with the criminal prosecution also naming co-founders Tarek Mansour and Luana Lopes Lara. The CFTC and Justice Department are separately asking a federal court to block Utah’s enforcement.

Other operators have reduced access as that confrontation escalated.

As DeFi Rate reported this week, DKeX and FanDuel Predicts restricted culture, politics and sports contracts in Utah while retaining financial-market offerings. Fanatics Markets announced a broader withdrawal.

“Geofencing” can mean excluding an entire state, blocking particular categories or restricting only new positions. The CFTC release does not determine, on an operator-by-operator basis, which measures violate its requirements.

The new interpretation therefore arrives while the federal government is still seeking judicial protection, not after it has secured an order resolving Utah’s enforcement powers.

Nevada and tribal lands add court-ordered complications

Nevada has also fought over whether Kalshi’s geographic controls actually prevent prohibited trading.

Regulators previously sought contempt sanctions after investigators said they could still access contracts despite restrictions. Kalshi disputed those allegations and argued that investigators circumvented its controls.

The Ninth Circuit Court of Appeals denied Kalshi’s requests for panel and en banc rehearing this week, leaving its August Nevada preliminary-injunction decision intact. The denial does not itself decide every claim in the underlying case, but it leaves Kalshi without the appellate reconsideration it sought.

California’s tribal case presents a separate federal-law issue.

This week, Judge Jacqueline Scott Corley entered a preliminary injunction barring Kalshi Inc. and KalshiEX from offering sports contracts on the plaintiff tribes’ Indian lands. The tribes must provide boundary maps by Nov. 13, and Kalshi must submit a compliance report within 21 days of the order. It is not a statewide California ban.

That injunction rests on the Indian Gaming Regulatory Act, not simply a state gambling restriction. The CFTC’s brief release does not specifically address that order or explain how its interpretation applies to federally ordered tribal-land exclusions.

The jurisdictional fight remains unresolved

The interpretation reinforces the CFTC’s position that regulated derivatives markets should operate nationally. It does not eliminate the disagreement among federal courts over whether sports contracts receive the federal protection exchanges claim.

The Third Circuit ruled for Kalshi in New Jersey. The Ninth Circuit ruled against it in Nevada, while the Sixth Circuit rejected preliminary protection in the linked Ohio and Tennessee appeals. This week, the Second Circuit denied injunctions pending appeal in Kalshi’s New York and Connecticut cases and Coinbase’s Connecticut case without resolving those appeals on the merits.

Other operators have secured protection. An Illinois federal judge entered a preliminary injunction Oct. 30 against specified state enforcement involving regulated swaps, including sports event contracts. Illinois appealed.

As DeFi Rate’s litigation tracker documents, U.S. Supreme Court petitions remain pending, but none has been granted. Kalshi’s response in the New Jersey matter is due Dec. 7.