CFTC Orders Kalshi to Honor Michigan Trades; Courts Press Appeals

State and federal courts in New York, Michigan and Washington saw new rulings and filings this week while the Commodity Futures Trading Commission used emergency power to block an attempt to cancel Michigan trades and ordered Kalshi to honor the positions.

In Michigan, Judge Rosemarie Aquilina extended a temporary restraining order limiting Kalshi’s activity in the state. The judge rejected Kalshi’s argument that federal law preempts state regulation, characterized the contracts as gambling rather than commodities, and gave Kalshi until Aug. 12 to geofence Michigan or face fines of $500,000 per day. The Michigan order marks the first time a state court has sought to unwind trades that were already executed.

The CFTC invoked emergency authority to prevent Kalshi from voiding the Michigan trades and directed the exchange to keep the positions in place. The agency argued that allowing cancellations based on a user’s location could harm market integrity and create uncertainty for market participants.

In New York, Kalshi filed for an injunction pending appeal after a federal judge denied its preliminary injunction request earlier in July. New York agreed not to pursue enforcement actions through July 30 while the company’s emergency request is under review. The court set a deadline for the state to file an opposition letter by July 22.

Kalshi and Washington state jointly asked the Ninth Circuit to pause briefing in a separate appeal until the court resolves consolidated appeals from Nevada. Arizona has filed a similar request to hold proceedings pending the Nevada rulings. Those Nevada appeals are expected to address whether the Commodity Exchange Act preempts state gambling laws when applied to CFTC-regulated event contracts.

The American Gaming Association moved to intervene in the federal lawsuit the CFTC brought against Wisconsin officials. Wisconsin does not oppose the association’s intervention; federal regulators have objected to the filing.

Regulatory developments continued alongside litigation. The CFTC approved Water Street Labs to operate as a designated contract market, allowing it to list futures and swaps, including fully collateralized products traded through a central limit order book and a parimutuel auction model. Intercontinental Exchange certified a new set of futures tied to major macroeconomic data releases.

Kalshi expanded its products and distribution this week. The company launched Kalshi Pro, an interface designed for active traders, and listed contracts on minor league baseball outcomes and drug trial results. Plans to list markets on flight cancellations appear to have been dropped. OpenAI began displaying Kalshi’s World Cup odds within ChatGPT responses, increasing public access to those markets.

Lawmakers and platforms continued scrutiny of prediction markets. A bipartisan bill supported by Kalshi would require online sportsbooks and prediction markets to use facial-recognition tools to estimate users’ ages before permitting trades. A member of Congress sent a letter to the CEO of another prediction market operator seeking information about allegations that paid influencers promoted election misinformation while advertising prediction markets. One operator restricted access in several Canadian provinces, including Alberta. Google expanded its ban on prediction market advertising to Michigan and New York, joining Nevada and Ohio on its restricted list.

The coming weeks will focus on appellate briefs and the consolidated Nevada appeals, which courts and regulators expect will address whether federal commodities law preempts state gambling statutes for event contracts regulated by the CFTC.