CFTC blocks Kalshi from canceling Michigan trades in state clash
Prediction market Kalshi faces conflicting federal and state orders after the CFTC barred it from canceling trades in Michigan, escalating a jurisdictional battle that threatens market certainty.
The US Commodity Futures Trading Commission on Tuesday ordered prediction market platform Kalshi to continue operating in Michigan, explicitly barring it from canceling trades as mandated by a recent state court ruling. The federal directive directly contradicts a June 29 order from Ingham County Circuit Court Judge Rosemarie Aquilina.
Judge Aquilina had required Kalshi to cease offering sports betting contracts to Michigan users while a state lawsuit over alleged violations of Michigan's sports betting laws plays out. In response to that state directive, Kalshi unwound the affected trades.
The subsequent federal reversal has trapped the exchange between competing legal systems. “We already acted and unwound the trades, as the Michigan court order required us to do,” said Robert DeNault, Kalshi’s head of enforcement and legal counsel. “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.”
For market participants, the dispute raises fundamental questions about contract enforceability and regulatory exposure. CFTC Chair Michael Selig warned that allowing states to void executed derivatives trades threatens the foundational certainty required for markets to function.
“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,” Selig said. The CFTC identified Michigan as the first state to attempt to interfere with executed derivatives transactions.
The confrontation highlights a widening jurisdictional vacuum between the federal commodities regulator and nearly two dozen state authorities over the oversight of prediction markets. The CFTC is aggressively moving to establish its supremacy over the sector.
“The Commission will not allow states or state courts to bully registered entities into violating the Commodity Exchange Act and CFTC regulations,” Selig said. Speaking on Fox Business, Selig noted the agency has already sued nine states. “We’ll continue to sue any state that attempts to impose criminal or civil fines against CFTC-registered exchanges,” he said. A Kalshi spokesperson said the company is reviewing the CFTC’s order and considering its next steps.
