US regulator says prediction market firms must serve all states despite court orders

CFTC demands nationwide access for prediction markets

The U.S. Commodity Futures Trading Commission has said regulated prediction market exchanges, including Kalshi and Polymarket, cannot cut off customers state by state. The agency said such exchanges must operate nationwide.

Prediction markets let people trade on the outcome of events such as sports, weather and politics. In the United States, companies like Kalshi are registered with the CFTC as designated contract markets, which are regulated exchanges that operate under federal derivatives law.

The CFTC issued the new interpretation late Thursday. It directly clashes with court orders that have told the firms to block access in certain states.

Main points at a glance

• The CFTC said designated contract markets are not allowed to go dark in specific states and must operate nationwide.
• Companies have 30 days to reopen access to closed-off regions or explain to the agency why that is not feasible.
• Kalshi customers in states including Nevada, Washington and Michigan had been blocked from trading while legal disputes continued.
• Recent court decisions have gone against the firms and against the CFTC position.

What the CFTC said

Chairman Mike Selig said in a statement: "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."

The CFTC said it expects designated contract markets to review their access criteria, exchange rules and intermediary access arrangements to ensure compliance.

The agency argued that cutting off whole states could increase dependence on a smaller group of market participants. It said sports contracts and election markets may be especially affected because interest and information can be strongly regional.

The CFTC is supposed to be led by a bipartisan group of five commissioners. The source material said it is currently occupied by one Republican, Selig, so its actions are issued unilaterally.

Court rulings behind the clash

The CFTC move follows a series of court actions in recent days that went against the prediction market firms and the CFTC position.

One decision from the U.S. Court of Appeals for the Second Circuit went against Kalshi and Coinbase and may allow enforcement actions to proceed in Connecticut and New York. Another decision from the U.S. Court of Appeals for the Ninth Circuit found Kalshi was likely to lose claims that its contracts do not violate tribal gambling laws. The matter was sent back to a federal judge in California, who decided prediction market access should be blocked in certain tribal jurisdictions.

Utah has also tried to halt Kalshi operations through a civil case and recent criminal charges. The source material noted Utah bans gambling entirely under its constitution.

In July, the CFTC had taken a similar position in a dispute over a Michigan court order to reverse trades.

Reactions from critics and lawmakers

Consumer advocate group Better Markets criticized the court rulings in support of limits, calling them the latest in a long line of decisions and saying the CFTC position was baseless. Better Markets also called for the gambling to be stopped and for prosecution. That is an opinion from the group, not a court finding quoted in full in the source.

U.S. Senator Adam Schiff, a California Democrat on the Senate Agriculture Committee, posted on X on Friday that "the CFTC and its rogue chairman now appear to be encouraging platforms to continue offering gambling products in contempt of these court orders." He called it the agency's "most egregious attempt yet to undermine state law, the tribes, and now, the courts."

A spokesperson for Kalshi did not respond to a request for comment on compliance plans by press time.

What happens next

Companies have 30 days to reopen their doors to closed-off regions, or submit an explanation to the agency for why that is not feasible. How the firms will comply while court orders remain in place was not confirmed in the source material.

Sources

• CoinDesk
• U.S. Commodity Futures Trading Commission

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