Kalshi caught between courtroom and CFTC, unwinds Michigan trades anyway 🎲

Kalshi said Wednesday it is in an "impossible position" after the US Commodity Futures Trading Commission ordered the prediction market platform to keep operating in Michigan, directly contradicting a state court ruling that required it to halt sports betting contracts in the state. The company said it had already unwound the affected trades to comply with the state order. "We are disappointed by this decision and believe it is unfair to Kalshi," Robert DeNault, Kalshi's head of enforcement and legal counsel, said in a statement on X. "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."

On June 29, Ingham County Circuit Court Judge Rosemarie Aquilina ordered Kalshi to cease offering sports betting contracts to Michigan users while a lawsuit over alleged violations of state sports betting laws proceeds. The CFTC's Tuesday order told Kalshi not to comply with that ruling and to continue operating. A Kalshi spokesperson told Reuters the company is reviewing the CFTC's order and considering its next steps.

The CFTC said Michigan is the first state to attempt to interfere with executed derivatives transactions on a registered exchange. "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," CFTC Chair Michael Selig said. "The Commission will not allow states or state courts to bully registered entities into violating the Commodity Exchange Act and CFTC regulations."

The dispute highlights an unresolved regulatory divide between the CFTC and nearly two dozen state regulators over which authorities hold jurisdiction over prediction markets. Kalshi operates as a designated contract market under CFTC oversight. The Michigan lawsuit is one of several state-level actions targeting event-contract platforms, and the outcome could determine how prediction market products are offered across US states.