The U.S. Commodity Futures Trading Commission is setting up another legal showdown over prediction markets companies who have been ordered by courts to stop doing business in certain states, with the federal regulator saying it's against the rules for exchanges — including Kalshi and Polymarket — to cut off customers based on geography.

Kalshi and other prediction markets platforms that offer event contracts in such arenas as sporting events, weather and politics are registered with the agency as "designated contract markets" (DCMs), and they operate under federal laws that govern the derivatives sector. The CFTC is now saying that such DCMs aren't allowed to go dark in specific states and must operate nationwide, despite court rulings that demand otherwise.

Companies are given 30 days to reopen their doors to closed-off regions, or they have to submit an explanation to the agency for why that "is not feasible."

Kalshi customers in states including Nevada, Washington and Michigan had been geofenced from trading with the company as it's been working out its legal disputes with those and other jurisdictions. Other states, such as Utah (where gambling is entirely outlawed under its constitution) have been vigorously trying to halt Kalshi's operations, with Utah battling the betting through a civil case and in recent criminal charges.

A rash of court actions and decisions have been going against the prediction markets firms (and the CFTC's position) in recent days, including: A U.S. Court of Appeals for the Second Circuit decision against Kalshi and Coinbase that may allow the pursuit of enforcement actions in Connecticut and New York; and the U.S. Court of Appeals for the Ninth Circuit found that Kalshi was likely to lose claims that its contracts don't violate tribal gambling laws, which sent the matter back to a federal judge in California who decided that prediction market access should be blocked in certain tribal jurisdictions.

Consumer advocates Better Markets called the federal court rulings the "latest in a long line of clear and strong decisions stating the obvious: The law is clear; the CFTC’s position promoting unrestrained prediction markets is baseless, and it’s time for this illegal gambling to be stopped and the grifters and lawbreakers prosecuted."