The Commodity Futures Trading Commission issued a demand on November 5 giving US derivatives exchanges 30 days to remove domestic geographic restrictions that violate impartial-access rules or explain why compliance is infeasible. The instruction covers designated contract markets, known as DCMs. The CFTC also expects DCMs to ensure that intermediaries accessing the exchanges comply within 30 days, or explain why compliance is infeasible. The interpretation calls for exchanges to review access criteria, exchange rules and arrangements with intermediaries.
The dispute concerns geofencing, which determines market access according to a trader's location. The CFTC's position generally opposes geographic exclusions for otherwise eligible US participants. The CFTC argues that excluding eligible traders can divide liquidity and impair price discovery. The guidance identifies election markets as an example where local traders may supply valuable information. The Commission says any potential action will depend on the facts and circumstances of each case. The dated release establishes the 30-day deadline, while the accompanying PDF remains open to technical corrections before publication and contains an incomplete effective-publication-date field.
The CFTC's position challenges the Sixth Circuit's September reasoning that geographic restrictions could satisfy federal obligations. In a September 25 preliminary-injunction opinion, the court found that Kalshi had not demonstrated that sports-event contracts qualified as swaps under the relevant statute. That classification supported Kalshi's argument for exclusive CFTC oversight. The court interpreted the definition to require an inherent financial, economic or commercial consequence, rather than indirect consequences arising from a sports result. The panel alternatively held that, even if the contracts qualified as swaps, the Commodity Exchange Act neither expressly nor implicitly preempted Ohio and Tennessee gambling laws.
The judges rejected Kalshi's argument that compliance with both federal and state requirements was impossible. The judges interpreted impartial access as access to the markets an exchange makes available, not a requirement to offer every event contract in every state. The judges also cited geographic restrictions that other companies use. However, the CFTC's revised interpretation cannot by itself reverse the court's swap-classification conclusion or the remaining preemption analysis. The Sixth Circuit upheld the denial of Kalshi's preliminary injunction in Ohio, vacated the Tennessee injunction and remanded the case. The ruling did not itself direct Kalshi to block users geographically in either state.
A separate CFTC proposal, published October 19, would explicitly bring sports, political, cultural and weather event contracts within the swap definition. The proposal's comment deadline is November 18. Crypto wallet Phantom's availability table excludes Michigan, Nevada and Washington from US access to Kalshi prediction markets. Phantom's October 28 integration announcement says access restrictions differ by market category. The announcement assigns Kalshi responsibility for approving and holding trading accounts and executing trades submitted through Phantom.
A November 4 federal order in California barred Kalshi Inc. and KalshiEX from offering sports contracts on Indian lands belonging to the plaintiff Tribes. The order requires boundary maps by November 13. The order also requires a compliance status report within 21 days. The restriction covers those lands, not California as a whole.
Kalshi must respond by December 7 to New Jersey's Supreme Court petition. The Supreme Court docket records an extension granted October 30. The petition arises from the Third Circuit and could allow the justices to consider the federal-state dispute if review is granted. The docket records no grant of review. The immediate operational question is which restrictions exchanges remove in response to the 30-day demand and which restrictions exchanges explain to the Division of Market Oversight.
CFTC Orders US Derivatives Exchanges to Remove Geofencing Restrictions
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Summary
The Commodity Futures Trading Commission (CFTC) ordered US derivatives exchanges to lift geofencing restrictions within 30 days or justify noncompliance, as reported by FLASH AI. The directive targets designated contract markets and intermediaries, aiming to boost liquidity and price discovery in the derivatives market. The CFTC challenges a recent court ruling supporting geographic limits. Separately, the CFTC proposed classifying event-based contracts as swaps, with comments due November 18. Traders are advised to keep an eye on altcoins to watch amid regulatory shifts.
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