You can absolutely host your networking gear/servers inside a co-location facility where the underlying exchange is hosted. It just requires tons of money to do so.
Realistically that isn't that much money unless you want to be some kind of hobbyist HFT tinkerer.
With no stance on whether people should be doing HFT as a hobby, presumably there is a finite amount of colocation space available and an opportunity cost/maintenance associated with onboarding people so this is what the market and regulators decided were the table stakes?
Yes, it's really not that much money, all things considered. Even regular colocation (just for hosting) at a name-brand facility with all the redundancy that the CME facility has would run you $1-2k a month.
On the order of thousands of dollars a month[0], depending on how close you want to get.
[0]: https://www.cmegroup.com/globex/connectivity-options.html