Share 
The Commodity Futures Trading Commission (CFTC) has directly responded to Michigan’s court ruling last month against Kalshi. The federal agency is using its emergency authority to force Kalshi to fulfill the trades Michigan wanted cancelled.
Just last month, an Ingham County Circuit Court granted Attorney General Dana Nessel‘s request to immediately halt Kalshi‘s sports operations in Michigan. Now, the CFTC is overriding the state’s ruling.
Michigan regulators have argued that prediction markets have avoided consumer protections and tax revenue that legal Michigan sportsbooks are subject to. This is the first time the CFTC has directly countermanded a state court order, escalating the fight in the Great Lakes State.
What the CFTC ordered
Earlier this week, the CFTC exercised its authority to use an emergency rule change in response to Michigan’s court order. Kalshi is to fulfill the open trades in accordance with its normal practices.
Chairman Michael S. Selig said in a statement:
“A state cannot force a DCM to violate its obligations, and federal law does not permit a DCM to discriminate against a state’s residents.
“Canceling trades that have already been executed is an unprecedented step that risks a cascading effect on the entire marketplace and undermines the certainty in contracting that is a necessary component of a functioning market.
“The Commission will not allow states or state courts to bully registered entities into violating the Commodity Exchange Act and CFTC regulations.”
This is a direct action against the court order issued last month, which essentially banned Kalshi from operating in Michigan. Also last month, the Michigan courts also sided with the state in a case against another prediction market operator, Polymarket.
AG Nessel did not immediately respond to PlayMichigan‘s request for comment.
The Ingham County Circuit Court threatened a $120,000 fine for each day Kalshi is noncompliant with the order.
Kalshi put in the middle
Kalshi did not stay quiet after the CFTC ordered the operator to fulfill open trades. Robert DeNault, lawyer and Head of Enforcement at Kalshi, wrote on X that the decision is unfair to Kalshi:
“We are disappointed by this decision and believe it is unfair to Kalshi. We already acted and unwound the trades, as the Michigan court order required us to do.
“We are being put in an impossible position, looking to follow state court orders that may contradict our federal regulatory obligations.
“We did not have a choice.”
Despite being federally regulated, Kalshi has complied with court orders, including Michigan, up until the CFTC’s decision this week. However, this was the first time Kalshi had to unwind already-executed trades.
The case between Kalshi and Michigan is far from over, and puts to the test on who has more power: the states or a federal agency.
