CFTC Orders Kalshi to Honor Michigan Trades Amid Regulatory Dispute
The Commodity Futures Trading Commission (CFTC) has instructed prediction market platform Kalshi to honor trades involving Michigan residents despite a state court order requiring the company to cancel certain sports-related contracts. The decision marks another escalation in the growing legal dispute between federal regulators and state authorities over who has jurisdiction over prediction markets.
CFTC Rejects Michigan's Order
Earlier this month, a Michigan state court directed Kalshi to stop offering sports event contracts within the state and unwind selected existing trades. However, CFTC Chairman Michael Selig said federal law does not allow a registered Designated Contract Market (DCM) to treat residents of one state differently or cancel legally executed contracts. He warned that reversing completed trades could damage market stability and reduce confidence in regulated financial markets.
Federal and State Regulators Continue Legal Battle
The disagreement highlights an ongoing conflict over the regulation of prediction markets. The CFTC maintains that Kalshi operates under the Commodity Exchange Act as a federally regulated exchange. Meanwhile, several state regulators argue that sports-related prediction contracts resemble online gambling and should fall under state gambling laws. Michigan Attorney General Dana Nessel has defended the state’s actions, saying gambling laws are designed to protect residents from unlicensed operators.
CFTC Expands Legal Action Against States
The CFTC stated that it will continue defending its authority over federally registered exchanges. Besides Michigan, the agency has filed lawsuits against Arizona, Connecticut, Illinois, Kentucky, Minnesota, New Mexico, New York, Rhode Island, and Wisconsin. According to the regulator, these legal actions aim to preserve the jurisdiction granted to the CFTC by Congress and prevent states from interfering with federally regulated prediction markets.
Jurisdiction Dispute Remains Unresolved
The latest order underscores the broader debate over the future of prediction markets in the United States. As federal and state regulators continue their legal fight, the outcome could shape how platforms like Kalshi operate and determine whether sports-related event contracts are treated as financial products or gambling activities.
