CFTC Gives Kalshi and Polymarket 30 Days to Drop State Blocks, Setting Up a Court Clash
The CFTC's is to keep prediction markets open in every state, but will courts allow it?
On this page
The Commodity Futures Trading Commission (CFTC) wants prediction markets open in every state. On November 5, the regulator told federally registered exchanges like Kalshi and Polymarket to stop blocking users by state. Platforms now have 30 days to lift those limits or explain why they can’t. Some of those blocks, however, are there because a court ordered them.
What the CFTC Actually Said
The move came as a new interpretation of the agency’s “impartial access” rule. That rule, Regulation 38.151(b), covers designated contract markets (DCMs). They must offer “competitive, open, fair, and impartial access.” According to the CFTC, cutting off users in certain states doesn’t meet that standard.
Exchanges that use domestic geographic restrictions must remove them within 30 days. If they can’t, they have to send an explanation to the CFTC’s Division of Market Oversight. Deadspin put that deadline at December 5. The same rule applies to intermediaries, such as brokers, that give customers access to these markets.
Chairman Michael Selig was blunt about it. “Derivatives markets must operate on a uniform basis at a national scale,” he said. Otherwise, in his view, they can’t serve the purposes of the Commodity Exchange Act. He added that “geographic access restrictions are inconsistent with those purposes and the Act’s impartial access requirements.”
The guidance also warns that leaving states out could shrink the pool of traders. Election markets, it says, may be especially sensitive to that kind of harm. Still, it isn’t a court order, and it doesn’t accuse any named exchange of breaking the rule. The CFTC said it will review the facts of each case before taking action.
Why Courts Are in the Way
For Kalshi, the timing is awkward. Because of court rulings over its sports contracts, it already geofences users in Michigan, Nevada, and Washington.
Yet, Michigan is where it got messiest. In July, the CFTC used emergency powers to stop Kalshi from canceling contracts held by Michigan users. On September 1, Judge Rosemarie Aquilina ruled that Kalshi “shall pay a fine of $500,000 per day” for any day it broke her geolocation order.
The pressure isn’t limited to state courts, either. On November 4, a federal judge in California stepped in too. So Kalshi can no longer offer sports contracts on the lands of the tribes that sued it. Federal appeals courts have also ruled against Kalshi in recent months, including the Second and Sixth Circuits. In Utah, Kalshi faces criminal charges, and the CFTC and the Justice Department have sued the state.
So if Kalshi reopens those states, it risks breaking court orders. If it doesn’t, it has to explain itself to its own federal regulator.
Pushback From Washington
The guidance drew a sharp response on Capitol Hill. Senator Adam Schiff, a California Democrat on the Senate Agriculture Committee, took aim at “the CFTC and its rogue chairman.” He called the guidance the agency’s “most egregious attempt yet to undermine state law, the tribes, and now, the courts.”
Advocacy group Better Markets also weighed in. To them, the recent rulings were the “latest in a long line” of court decisions “stating the obvious.”
There’s also a question of who made the call. The CFTC is meant to have 5 commissioners from both parties. Right now, Selig is the only one, so the agency’s decisions effectively come from him alone.
What Happens Next
Kalshi didn’t answer CoinDesk’s request for comment. Polymarket, for its part, hasn’t said how it will respond. Also, other operators could be affected too. DraftKings, FanDuel, and Fanatics already limit event contracts in states where they run sportsbooks.
For now, the 30-day clock is running. And by early December, exchanges must reopen blocked states or file their reasons. Either way, Washington and the states are still fighting over who gets to regulate prediction markets.
