CFTC Blocks Kalshi From Cancelling Michigan Sports Trades Ordered Voided

The Commodity Futures Trading Commission has stopped Kalshi from liquidating sports event contracts that a Michigan court ordered cancelled and refunded. The intervention leaves Michigan’s restriction on new sports trades intact while opening a direct federal-state confrontation over who controls transactions already executed on a regulated derivatives exchange.

Key Takeaways

• The CFTC ordered Kalshi to fulfill Michigan users’ open trades normally.
• Kalshi had proposed force-liquidating positions after a state court order.
• Michigan’s original geofencing order carried a $120,000 daily penalty.

Federal order protects completed trades, not new access

The Commodity Futures Trading Commission stayed an emergency Kalshi rule on Tuesday that would have force-liquidated open event-contract positions held by certain Michigan residents. Exercising emergency authority under the Commodity Exchange Act, the commission also directed the prediction market to fulfill the affected trades according to its normal practices.

Kalshi filed the emergency rule July 12 after an Ingham County Circuit Court verbally ordered it to close certain positions. The court clarified in July 6 correspondence that the trades had to be “voided, cancelled and refunded,” according to the CFTC order. Kalshi proposed selling the positions on its central order book at current market value and covering any shortfall between the sale price and each user’s original cost from its own funds.

The dispute began when Michigan Attorney General Dana Nessel and the Michigan Gaming Control Board sued Kalshi in March, alleging that its sports event contracts amount to unlicensed internet sports betting under the state’s Lawful Sports Betting Act. Kalshi maintains that the products are federally regulated derivatives under the Commodity Exchange Act rather than wagers governed by state gaming law.

Judge Rosemarie Aquilina issued a restraining order on June 29 prohibiting Kalshi from offering, listing, matching, executing, clearing or settling sports-related contracts for people located in Michigan. The order also required Kalshi to use a third-party geolocation provider meeting Michigan Gaming Control Board standards and imposed a $120,000 daily fine for failure to comply with that requirement.

The CFTC’s action does not expressly reopen Kalshi’s sports markets to Michigan users. Instead, it targets the narrower instruction to unwind positions that had already been executed, drawing a line between preventing new transactions and cancelling existing ones.

The commission found that allowing Kalshi’s emergency rule to take effect could constitute a major market disturbance by weakening confidence that completed derivatives transactions will be honored. It said even a limited number of forced liquidations could distort prices in related contracts and introduce uncertainty across futures, options and other federally regulated products.

“A state cannot force a DCM to violate its obligations,” CFTC Chairman Michael Selig said in the agency’s announcement, referring to Kalshi’s status as a designated contract market. Selig said cancelling previously executed trades was unprecedented and warned that the commission would not allow state courts to force registered exchanges to violate federal law.

Michigan’s original order rests on a competing view of the same products. Aquilina cited the state’s minimum betting age, responsible-gaming protections, taxation system and licensed sportsbook framework in finding that continued access could cause irreparable harm. The Michigan Gaming Control Board has characterized Kalshi’s contracts as sports betting presented as investment products, while Kalshi and the CFTC describe them as swaps subject to exclusive federal oversight.

The confrontation comes as the CFTC pursues a broader campaign to defend federal jurisdiction over prediction markets. The agency said it has sued nine states and filed appellate briefs in several additional disputes. Courts remain divided, while North Carolina has taken the opposite approach by recognizing federal oversight and taxing prediction-market fees without requiring a state gaming license.

Michigan is also the second state, after Nevada, to obtain an order requiring Kalshi to restrict access through geolocation. Nevada regulators have separately alleged that Kalshi’s IP geofence allowed residents to continue buying prohibited contracts despite a court order.

The CFTC’s order protects the Michigan positions from forced liquidation but does not resolve the underlying lawsuit or decide whether the state may block future sports event contracts. It instead creates a more immediate question: whether state gambling enforcement ends at the point where a trade has already become a federally regulated contractual obligation.