CFTC orders Kalshi to honor Michigan trades

The Commodity Futures Trading Commission on Tuesday directed Kalshi to fulfill trades involving Michigan residents after a state court issued a 14-day restraining order earlier this month. The Michigan order told the prediction-markets platform to stop offering sports-event contracts and to unwind certain executed positions.

Kalshi operates as a registered designated contract market under the Commodity Exchange Act and is overseen by the CFTC. The federal regulator said state courts lack authority to compel a registered exchange to cancel trades that were legally executed on a regulated market.

CFTC Chairman Michael Selig wrote that a state cannot require a designated contract market to violate its legal obligations or to treat a state’s residents differently. He warned that canceling already executed trades would risk cascading effects across the marketplace and would undermine certainty in contracting for participants.

Michigan Attorney General Dana Nessel argued the contracts violate state gambling laws and, when the restraining order was issued, said state law protects residents from unlicensed online gambling operations. Several other states have raised similar concerns about prediction markets that offer sports-related contracts.

The CFTC has filed lawsuits against Arizona, Connecticut, Illinois, Kentucky, Minnesota, New Mexico, New York, Rhode Island and Wisconsin seeking to confirm federal jurisdiction over registered markets. The agency framed the disputes as legal questions about whether state courts or regulators can force a federally registered market to act contrary to federal statutes and CFTC rules.

Kalshi’s platform allows users to buy and sell contracts tied to the outcomes of future events, including sporting events. The CFTC said forcing the exchange to unwind trades involving residents of a particular state would upset market certainty for other participants and for other registered venues.

Kalshi did not immediately respond to a request for comment. The CFTC’s lawsuits and any further court rulings will determine whether states can require registered markets to stop offering certain contracts or to cancel trades that have already been executed.