CFTC blocks Kalshi from canceling Michigan trades despite court order

The CFTC just told a Michigan state court, politely but firmly, to stay in its lane. On July 14, the federal derivatives regulator used its emergency authority to prevent Kalshi from complying with a Michigan court order that demanded the prediction market platform cancel trades made by Michigan residents and stop offering sports-related event contracts in the state.

What actually happened

On June 29, a Michigan state court issued a temporary restraining order against KalshiEX LLC, the CFTC-registered prediction market platform. The TRO had two demands: stop letting Michigan residents trade sports-related event contracts, and cancel the trades that had already been executed.

The CFTC directed Kalshi to settle its outstanding contracts through normal procedures rather than unwinding them at a state court’s request. CFTC Chairman Michael Selig framed the issue in jurisdictional terms, stating that a state cannot compel a designated contract market to violate federal laws.

Kalshi is a CFTC-registered DCM. That registration authorizes the platform to list event contracts across the entire US under federal derivatives rules. The Michigan court’s order essentially asked Kalshi to act as if that federal authorization didn’t exist within Michigan’s borders.

The bigger jurisdictional fight

Michigan isn’t operating in isolation here. Multiple states, including Kentucky and Nevada, are pursuing similar actions against Kalshi over its sports-related contracts. The core dispute is whether this is a federally regulated derivative or state-regulated gambling.

The CFTC has consistently taken the position that event contracts listed on registered DCMs fall under its exclusive jurisdiction. States like Michigan view sports-related prediction contracts as functionally identical to sports wagering, which states have regulated since the Supreme Court struck down the federal sports betting ban in 2018.

What this means for the prediction market industry

The CFTC’s insistence that executed trades be settled normally, rather than canceled retroactively, reinforces a fundamental principle of regulated markets: once a trade is done, it’s done. If state courts could order the unwinding of legally executed contracts on federal exchanges, it would introduce a type of regulatory risk that could chill participation across all event contract markets.

The Kentucky and Nevada cases will likely follow similar trajectories, and the cumulative weight of multiple state challenges could force the issue to federal appellate courts or even Congress.

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