CFTC Tells Platforms to Stop Geofencing States — Directly Colliding With State Court Orders
The CFTC issued an interpretation on November 5 of its 'impartial access' core principle, telling regulated exchanges including Kalshi and Polymarket to drop state-by-state geographic blocks within 30 days or explain why they cannot. The demand collides head-on with existing state court orders requiring the platforms to geofence: Washington ordered Kalshi to geofence in August, and Michigan ordered it to use licensed geolocation to block the state in September, with a $500,000 daily fine for violations. Chairman Michael Selig framed the interpretation as a uniformity requirement. The platforms are now caught between a federal demand to unblock states and state court orders to block them.
The CFTC issued an interpretation on November 5, 2026 of the 'impartial access' core principle governing the exchanges it regulates, declaring that the principle requires designated contract markets to offer access on a uniform national basis and therefore bars them from blocking users by state. The agency told regulated exchanges, including Kalshi and Polymarket, to drop their state-by-state geographic blocks within 30 days or explain why they cannot. Chairman Michael Selig framed it as market uniformity: '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.' Before this, the CFTC had not read impartial access to concern geographic access across the US; the interpretation is a new application of an existing rule, timed to reinforce the agency's position that federal law requires the platforms to operate nationwide.
For UK readers, imagine the FCA ordering a trading venue to serve the whole UK uniformly at the same moment that regional courts had ordered it to block specific areas — an irreconcilable conflict between two authorities. That is the position the platforms now face. Several state courts have ordered Kalshi to geofence specifically to keep its contracts out of their states: Washington ordered residency- and location-based geofencing in August; Michigan ordered Kalshi in September to use a licensed geolocation provider to block the state, with violations carrying a $500,000 daily fine; Nevada and others issued comparable orders. The CFTC's interpretation now tells the platforms to do exactly what those courts prohibited. A platform cannot both comply with a state court order to geofence and a federal demand not to — it faces penalties from one authority or the other whichever it obeys.
The legal difficulty for the CFTC is that courts have already rejected the specific argument the interpretation rests on. When Kalshi previously argued that geoblocking a state would breach the impartial-access rule, several courts disagreed — including the Ninth Circuit in the Nevada case and a Michigan judge who specifically rejected the contention. The November 5 interpretation essentially codifies, at the agency level, an argument federal courts have already declined to accept. Whether an agency interpretation issued after courts rejected the underlying argument carries weight is doubtful, particularly post-Chevron, where courts decide statutory meaning themselves. The interpretation may be better understood as the CFTC asserting its position as forcefully as it can while the Supreme Court cert petitions are pending, rather than as a legally decisive resolution.
The practical effect is to sharpen the federal-versus-state confrontation to its most acute point yet. The CFTC has already sued at least nine or ten states to block their enforcement; now it is affirmatively directing the platforms to defy the state court orders those states obtained. If the platforms comply with the CFTC and unblock the states, they expose themselves to contempt and daily fines under the state orders — Michigan's $500,000 per day being the starkest. If they comply with the state courts and keep geofencing, they violate a federal directive from their primary regulator and chief legal defender. The platforms have not said how they will respond, and the 30-day window may produce compliance, a request for more time, or fresh litigation over which authority controls. The interpretation does not mention court orders, state regulators, or tribes, leaving the hardest questions unaddressed. What is clear is that the dispute has moved beyond competing legal arguments into directly conflicting mandatory orders, and that resolution now depends more than ever on the Supreme Court deciding whether federal commodities regulation preempts state gambling law — the question it is expected to take up, if at all, no earlier than December.
Operators mentioned in this article
Recent updates
Kalshi's Parlays Drive Back-to-Back $5B Days — and Hand Critics Their Strongest Argument
Kalshi traded a record $5.33 billion on November 7 and $5.36 billion on November 8, with multi-leg parlay-style 'combos' making up roughly 75% of both days' volume. Its 30-day volume topped $100 billion. But the parlay dominance cuts against the platform's legal defence: parlays are a quintessential sportsbook product, and the American Gaming Association has told the Second Circuit that parlays make up about two-thirds of Kalshi's volume and should be treated as sports bets. The implied house edge on 10-plus-leg combos is around 25%, undercutting the argument that these are neutral financial instruments rather than gambling.
Cruz Bill Would Require State or Tribal Approval for Sports Contracts — a Bipartisan Legislative Threat Emerges
Senator Ted Cruz, who chairs the Senate Commerce Committee, is preparing a bill that would bar federally regulated prediction markets from offering gambling-tied event contracts, including sports, unless a state or tribal government authorises them. It would not ban the contracts nationwide but would require platforms to obtain approval jurisdiction by jurisdiction, resembling state-by-state sportsbook regulation. The proposal arrives as Democrats take control of both chambers after the midterms, creating a potential bipartisan reckoning for a sector that had relied on federal protection.
The Verdict on the 'First Prediction-Market Election': Markets Called the Democratic Sweep but Underestimated It
Democrats won control of both chambers of Congress in the November 3 midterms, an outcome Kalshi and Polymarket had priced as the favourite. Both platforms claimed roughly 98% directional accuracy across resolved races. But the headline figures carry caveats: much of that accuracy came from non-competitive races, independent reviewers judged the markets roughly comparable to conventional forecasts, and analysts noted the markets underestimated the size of the Democratic wave. The New York Times found prediction markets fared about the same as election forecasts; one economist gave them a 'B.' Kalshi's midterm volume reached $2.5 billion, nearly double the 2024 cycle.