Prediction market platform Kalshi is caught between conflicting orders from a federal regulator and a state court, creating what it calls an impossible situation.
The U.S. Commodity Futures Trading Commission (CFTC) on July 14 suspended an emergency rule change Kalshi had filed to comply with a Michigan court order, and directed the company to honor outstanding trades as usual. The CFTC said the state order conflicts with federal law that permits trading in most sports-related event contracts. On June 29, a Michigan court ordered Kalshi to stop offering sports betting to in-state users and also instructed the company to cancel settled trades involving Michigan residents.
Company says it had no choice
Robert DeNault, Kalshi's enforcement chief and legal counsel, said on X on July 15 that the company is disappointed and that the decision is unfair to Kalshi. "We already unwound trades as required by the Michigan court order. Following the state court order puts us in conflict with our federal regulatory obligations—an impossible position. We had no choice," he wrote.
CFTC Commissioner Michael Selig countered that "a state cannot compel a DCM [designated contract market] to violate its obligations" and called the cancellation of settled trades "an unprecedented action that could have cascading effects across markets." He stressed the commission will not allow states or state courts to push registered entities into violating the Commodity Exchange Act.
Broader regulatory battle
According to the CFTC, Michigan is the first state to attempt direct intervention in settled derivatives trades. The commission has sued nine states, including Arizona and New York, to defend its jurisdiction granted by Congress. Reuters reported that the latest action marks another front in the growing clash between federal regulators supporting the rapidly expanding prediction market industry and nearly 20 states and tribal nations trying to block startups from offering sports betting.
A Kalshi representative told Reuters the company is reviewing the CFTC order and discussing next steps.