The CFTC, the U.S. commodities regulator, expects prediction markets to restore access in states where they are blocked within 30 days or explain why they cannot.
The CFTC argues that federally registered prediction markets such as Kalshi and Polymarket cannot block customer access based on their state. The agency’s new legal interpretation says platforms must operate nationwide, putting it at odds with court orders restricting access in some states.
Recent rulings have made it harder for prediction market companies to operate in the states. A ruling by the Second Circuit Court of Appeals involving Kalshi and Coinbase could clear the way for enforcement proceedings in Connecticut and New York. The Ninth Circuit ruled that Kalshi is likely to lose its claim that its contracts do not violate tribal gambling laws. Following that ruling, a federal judge in California ordered access to prediction markets blocked in certain tribal territories.
CFTC seeks nationwide access to prediction markets
Under the CFTC’s interpretation, platforms must restore access within 30 days in areas where they have blocked it. If they cannot do so, they are expected to explain to the agency why it is not feasible. Kalshi had geographically blocked customers from trading in some states, including Nevada, Washington, and Michigan.
The agency argues that state-by-state restrictions could reduce trading volume and liquidity in some contracts. For example, predictions about whether a local team will make the playoffs may attract the most interest from users in that region. According to the CFTC, local knowledge and participation may also matter in election predictions.
CFTC Chair Mike Selig said derivatives markets should operate under the same rules nationwide. The agency’s legal opinion does not overturn court rulings. As a result, the conflict between the federal regulator’s expectations for access and court rulings in states and tribal territories continues. The commission is supposed to be led by five members on a bipartisan basis under the law, but currently consists only of Selig.
Consumer advocacy group Better Markets called the CFTC’s approach of allowing unrestricted access to prediction markets baseless and called for illegal gambling to be stopped and those responsible to be prosecuted.
Not investment advice.