The Commodity Futures Trading Commission (CFTC) has directed Kalshi to complete pending trades that the prediction market operator had previously unwound after a Michigan state court order. The move leaves the company arguing it is now trapped between conflicting legal demands from state and federal authorities.
The agency said it had stayed a Kalshi rule change and used its emergency authority to require the exchange to honor the affected trades. That decision effectively reverses Kalshi’s earlier response to the Michigan court order and prompted the company to say it is being forced into an impossible position.
Kalshi sharply criticized the regulator’s action in a statement from its Head of Enforcement and Legal Counsel, Robert Denault. The company said it reversed the trades only because it believed compliance with the Michigan court’s directive was mandatory.
“We are disappointed by this decision and believe it is unfair to Kalshi. We already acted and unwound the trades, as the Michigan court order required us to do,” Denault said.
The company said the CFTC’s order leaves it caught between state and federal authorities.
“We are being put in an impossible position, looking to follow state court orders that may contradict our federal regulatory obligations,” Denault said.
He added, “We did not have a choice.”
CFTC order deepens legal standoff between Michigan and Kalshi
According to the CFTC, the agency exercised its emergency authority to stay Kalshi’s rule change and require the exchange to fulfill the pending trades affected by the earlier unwind. Kalshi maintains it acted appropriately when it canceled those trades because it was complying with the Michigan court’s instructions. The company now says the federal directive conflicts with its obligations during the state court proceedings.
The latest dispute grows out of a lawsuit filed by Michigan Attorney General Dana Nessel, who alleges Kalshi is operating an unlicensed sports betting business in the state under the appearance of a federally regulated prediction market. The complaint argues Michigan residents can buy contracts tied to sporting events without approval from the Michigan Gaming Control Board, violating state gambling laws and the Lawful Sports Betting Act.
State lawyers cited contracts tied to hockey, golf, basketball and other sporting events, saying customers profit if their predictions are correct. Michigan has argued that sports-based event contracts function as gambling, while Kalshi has consistently maintained that its products are financial instruments governed by federal commodities law rather than state gaming rules.
The legal fight recently shifted again after a federal judge sent the case back to Michigan state court, rejecting Kalshi’s effort to keep the dispute in federal court. That ruling cleared the way for Michigan’s request for a preliminary injunction to continue before the state court.
“A state cannot force a DCM to violate its obligations, and federal law does not permit a DCM to discriminate against a state’s residents,” said Chairman Michael S. Selig.
“Canceling trades that have already been executed is an unprecedented step that risks a cascading effect on the entire marketplace and undermines the certainty in contracting that is a necessary component of a functioning market. The Commission will not allow states or state courts to bully registered entities into violating the Commodity Exchange Act and CFTC regulations.”
Featured image: Kalshi / Canva
