CFTC gives prediction markets 30 days to remove geographic restrictions in the US

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The Backstory

A federal push for a national market

The Commodity Futures Trading Commission’s latest directive puts the agency’s long-running prediction market strategy into sharper focus: federally registered exchanges should not have to tailor access to state-by-state gambling rules when offering event contracts the CFTC views as derivatives. By telling designated contract markets to remove domestic geographic restrictions within 30 days or explain why they cannot, the commission is asserting that prediction markets must operate as national venues, not as products fragmented by local gaming policy.

That position has been building for months through enforcement positions, court fights and rulemaking. The agency has repeatedly argued that event contracts listed on registered exchanges are governed by the Commodity Exchange Act and its impartial-access requirements. State regulators, attorneys general, tribal gaming interests and sportsbook operators have countered that sports-related contracts look and function like sports betting, particularly when offered to retail users around games, teams and athletes.

The current order raises the stakes because it targets one of the practical compromises prediction market operators and sports-betting companies had adopted: blocking users in certain states. Those limits were intended to reduce litigation and licensing risk. The CFTC now says those same restrictions may violate federal market-access rules and may harm customers who need to manage open positions while traveling or after moving across state lines.

Michigan became an early test case

The conflict between federal derivatives oversight and state gambling authority became especially visible in Michigan. After an Ingham County judge temporarily blocked Kalshi from offering sports event contracts in the state, the company proposed canceling pending trades from Michigan residents. The CFTC responded by ordering Kalshi to honor those trades, arguing that a registered derivatives exchange cannot cancel positions based on a customer’s residence without undermining the concept of a single national market.

Michigan officials rejected that view. Attorney General Dana Nessel’s office said the CFTC was interfering with the state’s ability to regulate companies operating within its borders and enforce sports-betting and tax laws. The state’s lawsuit against Kalshi alleged that sports-related event contracts amount to unlicensed sports betting and should be subject to the same state rules that apply to regulated sportsbooks.

The dispute, described in Michigan’s challenge to the CFTC’s order requiring Kalshi to honor trades, foreshadowed the broader access question now before the industry. If the CFTC can require Kalshi to maintain trades despite a state court restriction, it can also argue that exchanges should not proactively wall off users in states hostile to sports event contracts. For states, that logic threatens to limit the practical effect of their cease-and-desist actions, licensing threats and court orders.

Rulemaking aims to lock in jurisdiction

The CFTC has also moved to formalize its position through rulemaking. In October, the agency issued a notice of proposed rulemaking that would clarify that the definition of “swap” includes event contracts tied to sports, politics, cultural events and weather. At the same time, it issued an interim final rule stating that casino-style gambling products, including sportsbook wagers and casino games, are excluded from the swap definition.

That distinction is central to the agency’s legal theory. The CFTC is not saying all betting-like activity belongs in derivatives markets. It is saying federally listed event contracts are financial instruments, while sportsbook wagers remain gambling products outside its remit. The agency’s position, outlined in its proposal defining sports event contracts as swaps while excluding sportsbook wagers, attempts to draw a regulatory boundary that state officials and gaming interests say is artificial in practice.

The timing matters. The rulemaking comes as litigation over prediction markets moves through federal and state courts and as opponents press for clearer limits before the issue potentially reaches the Supreme Court. Complete iGaming’s sister publication CDC Gaming reported that the CFTC is seeking to confirm its authority over prediction markets before that next phase. If finalized, the rules would give the agency a stronger basis to argue that sports contracts listed on registered exchanges are not subject to state-by-state gambling vetoes.

Consumer presentation remains a regulatory fault line

Even as the CFTC defends federal jurisdiction over event contracts, it has shown concern about how the products are marketed and displayed. In August, the agency warned prediction market operators against showing contract prices in American odds format, the format commonly used by sportsbooks. The CFTC said that presentation could mislead users about the nature of the transaction and deprive them of information about market depth and pricing impact.

That warning, covered in the CFTC’s guidance against sportsbook-style odds displays, reflected the agency’s effort to keep prediction markets visibly distinct from gambling products while defending them as derivatives. The message to operators was clear: federal status does not give them license to mimic sportsbooks in ways that could confuse retail participants or strengthen state arguments that these are gambling products in another form.

The commission has also scrutinized newer contract types. In September, it issued an advisory on “mention” markets, warning that contracts based on whether a person says certain words, attends an event or interacts with someone may carry heightened manipulation risk because outcomes can hinge on discrete conduct that is difficult to verify independently. At the same time, Kalshi asked the CFTC to approve margin trading for some event contracts, excluding sports, culture and mention markets from that request.

The developments described in Kalshi’s margin-trading request and the CFTC’s mention-market advisory show the agency trying to balance market development with guardrails. It is encouraging a derivatives framework for prediction markets while signaling that leverage, manipulation risk, disclosure and product design remain central concerns.

North America is splitting on the model

The U.S. approach is not being mirrored across North America. Canadian regulators recently rejected the idea that sports and entertainment event contracts should be treated as securities or derivatives. In a joint notice, the Canadian Securities Administrators and the Canadian Investment Regulatory Organization said they do not consider it appropriate for dealer members to facilitate trading in those types of contracts under securities and derivatives legislation.

That position, detailed in Canadian regulators’ joint rejection of sports prediction markets, contrasts with the CFTC’s effort to bring sports contracts more clearly within derivatives law. Canada has allowed limited access to certain event contracts through authorized dealers, but those have been restricted to categories such as economic forecasts, environmental forecasts and financial indicators. Sports and entertainment outcomes are being treated differently.

The divergence underscores why the U.S. fight matters. If the CFTC prevails, federally registered prediction markets could gain a nationwide channel for sports-related contracts that operates outside the licensing structure built by states after the fall of the federal sports-betting ban. If states prevail, operators may face a patchwork similar to online sports betting, where access depends on local authorization, tax rules, responsible-gaming requirements and tribal compacts.

For incumbent sportsbooks, the outcome could affect competitive balance. Companies holding state sports-betting licenses have invested heavily in compliance and market access. Some have voluntarily avoided prediction-market sports contracts in states where they are licensed to reduce regulatory risk. A federal mandate against geographic restrictions could force a reassessment of those strategies and intensify pressure on state regulators to respond.

The stakes move beyond access controls

The access directive is therefore more than an operational order. It is a test of whether prediction markets can scale nationally under federal derivatives law while states maintain meaningful authority over sports wagering. The CFTC’s concern about customers losing account access while traveling points to a market-integrity rationale, but the practical consequence is broader availability of controversial sports contracts.

States are likely to keep arguing that sports event contracts compete directly with regulated sportsbooks and should carry comparable consumer protections, tax obligations and licensing scrutiny. The CFTC is likely to keep arguing that uniform access is necessary for national derivatives markets and that fragmented restrictions could undermine position management, liquidity and exchange obligations.

That unresolved tension explains the intensity around a 30-day compliance deadline. Operators must decide whether to remove restrictions, defend their inability to do so or risk running afoul of the federal regulator that authorizes their markets. State officials must decide whether to escalate litigation or licensing threats if exchanges reopen access in jurisdictions that have tried to block them.

The result could reshape prediction markets before courts or Congress provide a final answer. By linking impartial access to nationwide availability, the CFTC has moved the debate from whether sports event contracts may be listed to whether local governments can practically keep their residents out of them.