Geofencing

Prediction market platforms implement geofencing primarily through IP-address lookup services that map a connection's origin to a country or region. When a user's IP resolves to a blocked jurisdiction, the platform denies access or prevents trading. KYC identity verification adds a second layer: even if a VPN masks the IP, document checks tied to government-issued ID can confirm residency. Polymarket enforces both checks for high-volume users, requiring traders running seven-figure positions to verify identity regardless of their apparent IP location. Anti-Money Laundering obligations under OFAC rules make blocking sanctioned-country users a legal necessity, not an option. Platforms that fail to implement adequate geofencing face regulatory action: Polymarket paid a $1.4 million settlement to the CFTC in 2022 in part for serving US users without authorization, which drove its later investment in robust location controls.

IP-based geofencing is notoriously imperfect. Virtual Private Network (VPN) services allow users anywhere in the world to route traffic through servers in permitted jurisdictions, making a blocked user appear to be located in an allowed country. As of early 2026, Polymarket responded by blocking known VPN IP ranges and flagging accounts with behavioral signals — such as simultaneous logins from geographically distant IPs — for additional review. However, this escalation is a technological arms race: VPN providers rapidly cycle IP addresses, and determined users continue to find workarounds. For CFTC-Regulated Exchange platforms operating in the US, the legal concern is less about international VPN users and more about US state-level restrictions. Kalshi asserts federal preemption under CFTC authority to override state gambling laws, but some states contest this, creating a patchwork of legal uncertainty where geofencing decisions carry real legal stakes. The interaction between geofencing, Self-Exclusion registries, and Anti-Money Laundering programs will define compliance architecture for the sector through 2027 and beyond.