Why is BitMEX banned in USA?

BitMEX is by far the most liquid Bitcoin futures exchange. The platform offers up to 100x leverage and is notorious for its large insurance fund, which should serve traders in case the market becomes dysfunctional. 

However, to the misfortune of US citizens, the exchange restricts residents of the USA from using its platform.

This is a restriction that BitMEX certainly didn’t implement lightly, due to the paramount importance of the US in cryptocurrency trading markets. As we will outline during this article, though, there are good reasons for the exchange to do so.

US futures trading regulations 

To operate a futures exchange in the US, firms need to register with the CFTC and obtain a broker license. 

Due to Bitcoin’s unregulated nature, BitMEX is not able to satisfy these regulations while still offering extremely high leverage and lenient identity verification requirements.

As cryptocurrencies came below the regulatory spotlight in mid-2017, BitMEX was forced to announce that US citizens would be restricted from using its platform.

Precedents

BitMEX’s reluctance when it comes to accepting US customers is quickly understood when looking at how many similar businesses US government agencies have shut down in the past.

One notable example is the futures exchange 1Broker. 1Broker enabled its customers to trade a variety of trading products with very high leverage and by using BTC as collateral.

In September 2018, the SEC and CFTC simultaneously filed lawsuits against the company 1Broker for, supposedly, violating US securities laws.

Although the platform didn’t have any physical connection to the US, around a 20% of its userbase was, in fact, based in the US.

Shortly after the lawsuit was filed, the site’s domain got seized and 1Broker was forced to close its doors, after being in business for almost 6 years.

US ban controversies

Finally, even though BitMEX strictly prohibits US citizens from using its platform, the exchange is notorious for having a large US userbase.

This is due to the fact of how leniently the US ban is executed on BitMEX. The exchange purely relies on the user’s IP address to judge the individual’s nationality.

This filter is superficial, to say the least, since the IP address can be easily changed by making use of any VPN service provider.

Users do not have to complete identity verification like it is the norm on most other exchanges.