Kalshi’s Michigan sports contracts have landed the prediction market platform in a jurisdictional trap: the Commodity Futures Trading Commission (CFTC) ordered it on 14 July to keep operating in the state, even after Kalshi had already unwound trades to comply with a Michigan court ruling that went the other way.
The standoff matters beyond one state. A Cherokee Nation comment submitted to the CFTC puts approximately 90% of Kalshi’s revenue in sports contracts, across a base of 5.1 million active monthly users as of early 2026. A prolonged multi-state squeeze on those products is an existential revenue question.
Kalshi’s head of enforcement and legal counsel, Robert DeNault, framed the bind plainly in a post on X: ‘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.’
A Kalshi spokesperson told Reuters the company is reviewing the CFTC’s order and weighing its next steps.
How the Michigan Dispute Unfolded
Ingham County Circuit Court Judge Rosemarie Aquilina issued a 14-day temporary restraining order on 29 June, running through 13 July, requiring Kalshi to use geolocation to block Michigan residents from accessing sports-related contracts and advertising, according to the Detroit News. Non-compliance carried potential fines of up to $120,000 per day. Kalshi unwound the affected trades. The CFTC then ordered it to reverse course.
Michigan Attorney General Dana Nessel filed the underlying lawsuit in March 2026, arguing Kalshi’s event contracts function as unlicensed online sports betting under the oversight of the Michigan Gaming Control Board (MGCB). Kalshi counters that its products are event contracts under the Commodity Exchange Act and fall exclusively under federal jurisdiction.
CFTC Chair Michael Selig pushed back hard on the trade-cancellation precedent: ‘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.’ He added: ‘The Commission will not allow states or state courts to bully registered entities into violating the Commodity Exchange Act and CFTC regulations.’
Beyond preemption, Michigan Advance reported that Selig cited an additional rationale: federal law does not permit a designated contract market to discriminate against residents of any particular state.
A Multi-Front Legal War the CFTC Chose to Escalate
Michigan is one front in a broader enforcement conflict the CFTC has actively widened. The CFTC’s own press release confirms it has filed lawsuits against Arizona, Connecticut, Illinois, and New York seeking declaratory judgments that federal law grants it exclusive authority over event contracts, and requesting permanent injunctions against state enforcement. The snippet also references CFTC Chair Selig saying the agency has sued nine states in total; the CFTC press release confirms at least those four named defendants.
Arizona pushed the conflict furthest. A separate CFTC press release confirms Arizona pursued criminal charges against CFTC-regulated prediction market entities, prompting the agency to seek an injunction blocking both criminal and civil enforcement. The CFTC secured a temporary restraining order against Arizona.
The Third Circuit has already ruled in the CFTC’s favour on the underlying legal question. In Flaherty v. Kalshi, the appeals court held that Kalshi’s sports-related event contracts are ‘swaps’ subject to CFTC jurisdiction, a precedent the agency has since cited in its amicus brief to the Ohio court. The CFTC also filed an amicus brief before the Massachusetts Supreme Judicial Court; Selig’s message there was direct: ‘we will see you in court.’
Not every court has agreed. New York’s Judge Analisa Torres denied Kalshi’s bid for a preliminary injunction, ruling that geolocation technology and federal registration do not exempt the platform from New York’s licensing requirements, according to Yahoo Finance. Massachusetts has a preliminary injunction in place blocking similar products, with allegations in that case now expanded to include claims that Kalshi targets users under 21.
The CFTC has also opened an Advanced Notice of Proposed Rulemaking to clarify where the Commodity Exchange Act’s boundaries sit on prediction markets, signalling that a formal regulatory framework is coming regardless of how individual state cases resolve. The shape of that rulemaking, and whether Congress moves the CLARITY Act forward, will determine whether this wave of state litigation becomes a permanent feature or a holding pattern.
