TLDR The CFTC gave prediction market exchanges 30 days to remove domestic geographic restrictions. Exchanges can instead send a written explanation of why compliance is not feasible. Court orders in Michigan, Nevada and Washington require platforms to geofence users. Senator Adam Schiff said the guidance encourages platforms to defy court orders. DraftKings CEO Jason Robins said the guidance is unlikely to affect the company.
Registered prediction market exchanges now face a deadline from federal regulators. The Commodity Futures Trading Commission (CFTC) has told them to remove geographic restrictions within 30 days or explain in writing why they cannot.
The interpretive guidance was issued on November 5. That places the deadline around December 5.
The guidance is based on Commission Regulation 38.151(b). That rule requires designated contract markets, known as DCMs, to give members and traders competitive, open, fair and impartial access.
Two Paths for Exchanges
Under the guidance, exchanges must drop domestic geographic limits that break those access rules. The other option is to send a written explanation to the CFTC’s Division of Market Oversight stating why compliance is not feasible.
The commission said it will look at the facts and circumstances of each case before deciding on any regulatory action. Exchanges must also make sure intermediaries that access their markets follow the same rules.
The guidance does not say how exchanges should handle conflicts between federal access rules and court orders. It also does not list penalties for failing to comply.
“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. “Geographic access restrictions are inconsistent with those purposes and the Act’s impartial access requirements.”
Derivatives markets must operate on a uniform basis on