A freeport, also called a tradeworld, was a type of settlement dedicated to free trade. They were created by Orions, but other races founded their own.
They were created as a result of Federation trade policy, which allowed for certain exemptions to the Federation Uniform Mercantile Code (FUMC) to promote trade in struggling and economically marginal areas and industries. Under these allowances, Orions formed the freeports, as protected enclaves that were exempt from taxation, duties, licensing fees and other strictures of the FUMC, as well as having no tariffs or regulations to control or limit trade. (FASA RPG - The Orions: Book of Deep Knowledge module:)
A number of Orion families opened up the first freeports and tradeworlds in reference stardate 1/4112, shortly before the FUMC came into effect on stardate 1/4212.31. The first freeport experiments were a major success, and Orion traders leasing out commercial spaces and setting up trade brokerage houses quickly and greatly recouped their costs.
One such freeport was Freeloader, officially opened for business on stardate 1/5103.27, which was the first and most notorious freeport in the Triangle. This marked the commencement of large-scale trade activity within the Triangle. (FASA RPG - The Orions module: Book of Common Knowledge)
Freeports proliferated in the Triangle; the most infamous were Orion, but other inhabitants of the region created their own. Others could be found within the Federation itself.
Though Freeloader and other early freeports flourished as commercial centers, later examples were not so lucky. (FASA RPG - The Orions modules: Book of Deep Knowledge, Book of Common Knowledge)
The vast majority of freeports remained mostly undeveloped, poor and utterly dependent on a high trade volume, starport fees and a variety of service industries just to stay in operation. They became hives of crime and vice, where pirates and criminals moved freely and nearly anything was legal, even deep in the Federation.
The Federation policy had failed to help these undeveloped regions. Starfleet was unable to act against freeport crime, and settled for tidying up the mess left around them. Unable to improve themselves and protected from the law, these freeports remained in a sorry state. The Orion's Botchok Planetary Congress labeled them the "ghettoes of the Federation", and Orion populations in Federation freeports resented the Federation for their misery. (FASA RPG - The Orions module: Book of Deep Knowledge)