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The Commodity Futures Trading Commission has given prediction markets 30 days to remove domestic geographic restrictions that violate its impartial access requirements or explain why compliance is not feasible, according to InGame.
The interpretation could affect Kalshi and sports event-contract offerings from DraftKings, FanDuel and Fanatics, which face state-level restrictions.
CFTC applies impartial access rules to state restrictions
The CFTC issued an interpretation of its second core principle, which concerns impartial access. Previously, the agency had not interpreted that principle to require geographic access across the United States.
Designated contract markets must end domestic restrictions that violate the requirements or submit an explanation to the CFTC’s Division of Market Oversight. The interpretation also applies to intermediaries, including futures commission merchants and introducing brokers that provide customers access to other exchanges.
“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.
The agency said restricted access can reduce liquidity and undermine an exchange’s ability to serve as an effective marketplace for trading and risk management. It highlighted sports contracts, where excluding regions with strong interest in a particular team could decrease overall liquidity.
Operators face court orders and licensing pressure
Kalshi’s sports contracts have been banned by court orders in Michigan, Nevada and Washington. The company also withdrew those contracts from Utah after the state brought criminal charges.
Those restrictions create potential conflicts between the federal interpretation and state enforcement. DraftKings, Fanatics and FanDuel restrict sports event-contract access in some states because gaming commissions have threatened to revoke sportsbook licenses held by operators offering those contracts.
The CFTC interpretation requires affected exchanges to “submit to the Division of Market Oversight (‘Division’) an explanation for why such compliance is not feasible” if they cannot meet the requirement within 30 days.
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Source: As reported by InGame.
