Key Points Federal regulators instructed Kalshi to disregard a Michigan court directive ordering trade cancellations A county court in Michigan had demanded Kalshi reverse and reimburse speci
On Tuesday, the U.S. Commodity Futures Trading Commission directed the prediction market operator Kalshi to maintain existing trades with Michigan customers. The directive came in response to a Michigan county court ruling that required Kalshi to reverse and reimburse particular customer contracts linked to sports outcome predictions.
JUST IN: CFTC blocks Kalshi from canceling Michigan trades despite a state court order
Chairman Michael Selig says the agency "will not allow states or state courts to bully registered entities into violating federal law," per Reuters.
The clash is the latest in a battle… pic.twitter.com/TQpC19QAQo
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As a designated contract market (DCM) licensed by the CFTC, Kalshi operates under federal oversight through the Commodity Exchange Act.
The Michigan judicial order originated in June after Michigan Attorney General Dana Nessel submitted a formal request. Her department contended that Kalshi was conducting unauthorized gambling activities within state boundaries.
On July 2, Kalshi submitted an urgent petition to the CFTC seeking guidance on how to address the state court’s requirement to have contracts “voided, cancelled and refunded.”
The federal regulator’s response was clear: Kalshi should disregard the Michigan directive and maintain existing trades.
CFTC Chair Mike Selig characterized the cancellation of completed contracts as “an unprecedented step” that risked undermining confidence across the entire trading ecosystem.
“The commission will not allow states or state courts to bully registered entities into violating the Commodity Exchange Act and CFTC regulations,” Selig declared in an official statement.
Michigan isn’t standing alone in this dispute. The [[LINK_START_1]]CFTC[[LINK_END_1]] has initiated legal proceedings against nine other states: Arizona, Connecticut, Illinois, Kentucky, Minnesota, New Mexico, New York, Rhode Island, and Wisconsin.
Each lawsuit centers on the same fundamental disagreement. State authorities argue prediction markets constitute unlawful internet gambling. The federal commission maintains that Congress granted it exclusive jurisdiction over these platforms.
What sets Michigan apart is its attempt to actively reverse already-completed transactions—a boundary no other state has crossed.
Selig cautioned that permitting states to unwind finalized trades would trigger a “cascading effect on the entire marketplace.” He emphasized that market stability depends on the finality of executed transactions.
The commission further pointed out that federal regulations prohibit a DCM from excluding participants based on their state of residence, preventing Kalshi from simply blocking Michigan customers to appease state authorities.
The resolution of this confrontation could determine the operational framework for prediction markets nationwide. In the immediate term, the CFTC’s directive requires Kalshi to uphold all Michigan-based contracts.
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