CFTC Orders Kalshi to Honor Trades a Michigan Court Told It to Cancel, Escalating a State Jurisdiction Fight

The Commodity Futures Trading Commission inserted itself between Michigan’s courts and prediction market firm Kalshi on Tuesday, ordering the company not to comply with a state court demand that it cancel previously executed customer trades.

The dispute traces to June, when a Michigan county court ordered Kalshi to stop offering online sports contracts in the state, a halt sought by Attorney General Dana Nessel, who argued the products amount to illegal gambling. On July 2, Kalshi asked the CFTC how to handle a related order directing it to void, cancel, and refund certain Michigan users’ trades. The agency told it to stand down.

CFTC Chair Mike Selig said a state cannot force a federally regulated exchange to violate its obligations or discriminate against a state’s residents, and warned that unwinding executed trades is an unprecedented step that risks a cascading effect across the marketplace. Allowing reversals, the agency said, would give traders reason to fear that trades executed today could be undone weeks or years later.

Michigan is the first state to try to interfere directly with executed transactions, but it is part of a broader fight for the oversight of prediction markets. The CFTC has sued nine states, including Arizona, New York, and Illinois, over attempts to restrict event contracts as gambling, and has filed amicus briefs in two federal appeals circuits.

Related Listen: Why CME Sued the CFTC Over the Kalshi Bitcoin Perp Approval

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