CFTC directs Kalshi to honor trades for Michigan residents despite state judge’s order

The CFTC just told Kalshi to keep processing trades for Michigan residents, even as a state judge ordered the prediction market platform to stop offering sports-related contracts in the state.

Ingham County Circuit Court Judge Rosemary Aquilina issued a temporary restraining order on June 29 against KalshiEX LLC, prohibiting the platform from offering sports-related event contracts to Michigan residents for 14 days. The TRO carries potential fines of $120,000 per day for non-compliance.

A jurisdictional tug-of-war with real money on the line

Kalshi is a CFTC-registered Designated Contract Market, which means the federal government has formally recognized it as a legitimate exchange operating under the Commodity Exchange Act. The CFTC’s position is that event contracts qualify as swaps under federal law, and federal oversight preempts state gaming regulations.

Michigan sees it differently. The state’s Gaming Control Board argued the TRO was necessary to protect vulnerable residents from what it characterizes as unlicensed sports wagering. Michigan Attorney General Dana Nessel initiated the underlying lawsuit on March 5, following a federal remand that sent the case back to state court.

The CFTC directing Kalshi to honor existing trades puts the federal regulator squarely in the corner of its registered exchange. Whether that directive carries enough legal weight to shield Kalshi from Michigan’s $120,000-per-day fines is another question entirely.

Michigan is just one front in a multi-state battle

Kalshi is facing similar disputes in Nevada and New Jersey, where state regulators have pushed back against the platform’s sports-related event contracts. The pattern is consistent: states with established gaming industries and regulatory frameworks view prediction markets as encroaching on their turf, while federal regulators insist these products are financial instruments, not gambling.

Kalshi has complied with the TRO while simultaneously asserting that the federal government holds exclusive jurisdiction over its contracts. The CFTC’s directive to honor trades adds another layer of complexity, potentially giving Kalshi legal cover to push back more aggressively.

What this means for prediction markets and crypto investors

If the CFTC’s federal preemption argument ultimately prevails in court, it would mean that a CFTC-registered DCM can offer event contracts nationwide without needing to satisfy each state’s individual gaming requirements. If state courts successfully assert jurisdiction over sports-related event contracts, the same contract could be legal in some states, banned in others, and in regulatory limbo in the rest—fundamentally changing the liquidity dynamics and market depth that make prediction markets useful.

The 14-day TRO window is ticking. What happens when it expires—whether Michigan seeks an extension, whether Kalshi challenges the order more aggressively with the CFTC’s backing—will set the tone for the next phase of this fight. The first definitive ruling on federal preemption in Michigan, Nevada, or New Jersey will immediately reshape the risk calculus for every platform in the sector.

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