Key Takeaways
- A Michigan judge ordered Kalshi to stop offering sports event contracts to residents on June 29.
- On July 15, the CFTC blocked Kalshi from canceling contracts that had already been completed.
- Kalshi said it had already canceled those trades before the federal order, leaving it stuck between state and federal rules.
A legal battle between Michigan and the CFTC over Kalshi is escalating after federal regulators blocked the company from canceling completed sports contracts.
The case could determine whether states or the federal government have authority over prediction markets.
Michigan Court Fires the First Shot
The legal fight started when Michigan Attorney General Dana Nessel sued Kalshi. The state argued that Kalshi was breaking the Michigan Lawful Sports Betting Act by offering sports event contracts that looked more like sports betting than financial investments.
Kalshi lets users buy and sell contracts based on the outcomes of real-world events, including sporting events.
On June 29, Ingham County Circuit Court Judge Rosemarie Aquilina granted a temporary restraining order. She ordered Kalshi to stop offering sports event contracts in Michigan, saying the company was causing “immediate and irreparable harm.”
Michigan joins several other states that believe prediction markets are offering sports betting without following state gambling laws.
The CFTC Draws Its Own Line
The federal government quickly responded.
On July 15, CFTC Chair Michael S. Selig announced that the agency would not allow Kalshi to cancel trades that had already been completed. He argued that a state court cannot force a federally regulated exchange to violate federal law.
Selig also said federal law prevents regulated exchanges from treating residents of one state differently from those in another.
He warned that canceling completed trades could damage confidence in financial markets and said the CFTC would continue protecting exchanges that follow federal rules.
The move shows the federal government believes prediction markets fall under its authority, even when states disagree.
Kalshi Caught in the Middle, Michigan Pushes Back on Federal Overreach Claim
Kalshi said it had already canceled the trades before receiving the CFTC’s order because it was following the Michigan court’s instructions.
Robert J. DeNault, Kalshi’s legal counsel and head of enforcement, said the company had no choice.
“We are being put in an impossible position, looking to follow state court orders that may contradict our federal regulatory obligations.”
The situation highlights the challenge facing Kalshi. The company is regulated by the CFTC but also operates in states that have their own gambling laws. Many states believe sports prediction contracts should be treated the same as traditional sports betting.
Michigan officials rejected the CFTC’s position.
Press Secretary Danny Wimmer said the federal agency was trying to weaken states’ ability to regulate sports betting and collect taxes.
He argued that Kalshi should have to follow Michigan law just like any other company doing business in the state.
Other states have raised similar concerns. Prediction markets have offered sports contracts in places like California and Texas, where traditional sports betting is still unregulated. State officials argue these platforms avoid licensing rules, taxes, and consumer protections required of sportsbooks.
What’s Next
The legal battle is far from over.
Kalshi has already followed Michigan’s court order, but the CFTC says those actions should not have happened. More court cases are likely before it becomes clear whether states or the federal government control prediction markets.
The outcome could reshape the industry. If states win, companies like Kalshi may need gambling licenses or leave certain markets. If the CFTC wins, prediction markets could continue operating under federal oversight, setting up a major challenge for state regulators and regulated sportsbooks.
You must be logged in to comment. Don't have an account? Sign up today.