CFTC stays Kalshi's Michigan trade cancellations, deepens state-federal rift
Regulation & Gov ·
The federal regulator has blocked Kalshi from unwinding executed trades tied to Michigan residents, ordering the exchange to keep those contracts open despite a state court directive.
The CFTC stayed an emergency rule change KalshiEX had proposed that would have canceled trades involving Michigan users, a move the exchange had planned in response to a state court order. Instead, the commission is directing Kalshi to honor the open contracts, effectively overriding the state-level action and asserting federal jurisdiction over how the exchange handles its Michigan-linked positions.
The dispute traces back to a Michigan court blocking Kalshi's sports event contracts for 14 days as part of a state gambling suit filed in June 2026. Kalshi, designated by the CFTC as a contract market since 2020, has maintained that its event contracts function as regulated financial swaps rather than gambling products, a position the exchange and federal regulators have pressed in parallel disputes elsewhere. The Michigan standoff mirrors a similar clash in Arizona, where the DOJ and CFTC moved to block state prosecution of Kalshi on comparable grounds, arguing that sports and election contracts fall under federal derivatives law rather than state gambling statutes.
The Block reported that the order escalates the broader clash between Kalshi and state regulators, who have separately pushed back on the exchange's expansion into sports-linked event contracts. The Michigan episode adds to a pattern of state authorities attempting to apply gambling law to Kalshi's products while the CFTC works to keep oversight centralized at the federal level, a tension that has also drawn bipartisan scrutiny from the House alongside rivals Polymarket and Hyperliquid as lawmakers weigh incoming prediction market rules.
For Kalshi, the stay preserves the exchange's ability to keep Michigan positions active for now, but it does not resolve the underlying jurisdictional question raised by the state court's original order. It remains unresolved how Michigan authorities will respond to being overridden by federal action, whether the state will pursue further legal remedies, and how the outcome here might shape the parallel Arizona dispute. The broader question of whether prediction markets like Kalshi answer primarily to state gambling regulators or federal derivatives law, tracked in ongoing coverage via Leviathan's Kalshi and CFTC atlas entries, remains open as more states weigh similar challenges.