Who decides where Americans can trade on prediction markets: federal regulators or individual states?
That question is at the center of a growing dispute involving the Commodity Futures Trading Commission, or CFTC, and exchanges such as Kalshi. A new CFTC interpretation says federally regulated exchanges generally should not block otherwise eligible U.S. traders simply because of their location.
But some state courts have ordered platforms to do exactly that.
The result is a conflict over access—one that could shape the future of sports event contracts and other prediction-market products.
And the news comes just days after New York regulators tried a new tactic in their battle with Kalshi.
What the CFTC Says About Prediction Markets
The CFTC’s interpretation focuses on the impartial access requirements in Commission Regulation 38.151(b).
According to the announcement described, designated contract markets, or DCMs, must remove domestic geographic restrictions within 30 days or explain to the agency’s Division of Market Oversight why they cannot comply.
DCMs are exchanges regulated by the CFTC. Kalshi operates within this federal framework.
The agency’s position is that derivatives markets should function nationally. Blocking eligible participants based on their state, it argues, can reduce trading activity and weaken fair, open competition.
CFTC Chairman Michael S. Selig framed the issue around national uniformity: federally regulated derivatives markets should not operate under a patchwork of geographic barriers.
Why Kalshi Faces a Difficult Choice
The CFTC prediction markets dispute becomes more complicated when state court orders enter the picture.
States have challenged sports event contracts on the grounds that they amount to gambling without the required state authorization. Those challenges have led to orders requiring geographic blocking, often called geofencing.
The supplied account identifies court-ordered restrictions on Kalshi’s sports contracts in Michigan, Nevada, and Washington. It also describes a retreat in Utah amid criminal charges. Opponents say  sports contracts operate like bets and require a state gaming license.
That leaves exchanges facing competing demands:
- State courts may require them to block certain contracts within a state.
- The CFTC says domestic geographic restrictions generally conflict with federal impartial access requirements.
- Exchanges unable to remove those restrictions must explain their circumstances to the agency.
The central problem is straightforward: complying with one authority’s direction may conflict with another authority’s order.
Does the CFTC Interpretation Override State Court Orders?
The interpretation should not be read as automatically canceling existing court orders.
The CFTC has provided a way for exchanges to explain why compliance is not feasible. A binding court order would be an important issue for an exchange to raise.
This distinction matters. The agency is asserting its view of federal requirements, but the announcement alone does not resolve every dispute over state authority.
For Kalshi, the immediate issue is therefore not simply whether to restore access. It is how to respond to federal expectations while addressing court-imposed restrictions.
The Bigger Fight: Federal Authority Versus State Gambling Laws
Behind the access dispute is a legal question known as federal preemption.
In plain language, preemption asks whether federal law takes priority over state law in a particular area.
The CFTC’s position supports the argument that contracts traded on federally regulated exchanges fall under federal derivatives oversight rather than state gambling regulation. States challenging sports event contracts dispute how far that protection extends.
The supplied account also describes a CFTC lawsuit, joined by the Department of Justice, seeking to block Utah’s enforcement against registered prediction markets.
These disputes connect a practical question—where a contract can be traded—to a much larger one: which government has the authority to regulate it?
Why Other Prediction-Market Operators Are Watching
Kalshi is not the only business affected.
Companies with both sportsbook operations and prediction-market businesses face an added challenge. The supplied information identifies DraftKings, FanDuel, and Fanatics as operators that have restricted sports event contracts in states where they hold sportsbook licenses, partly because of pressure from state regulators.
For these businesses, expanding prediction-market access may create tension with their existing state-regulated operations.
The CFTC’s interpretation puts those restrictions under greater scrutiny, but it does not remove the competing legal and business pressures.
What Traders Should Watch Next
Three developments will help determine what happens next:
- Exchange responses: Whether platforms remove restrictions or explain why they cannot.
- CFTC decisions: How the agency handles explanations involving court orders.
- Court rulings: Whether judges accept or reject federal preemption arguments in the ongoing cases.
For traders, the key distinction is between a regulator’s position and actual contract availability. A federal announcement does not necessarily mean every Kalshi sports contract becomes available nationwide.
Until the conflicts are resolved, users should check the platform’s current restrictions rather than assume that access has changed.
