CFTC orders Kalshi to keep offering sports events contracts in Michigan
Derivatives regulator claims platform was “bullied” into leaving the Great Lake State, while Kalshi lawyer insists it has been put in an “impossible position”
The Commodity Futures Trading Commission (CFTC) has intervened in a Michigan court case against Kalshi, ordering the prediction markets platform to keep offering sports events contracts in the state on the grounds the ruling “bullied” Kalshi into breaking the regulator’s laws.
At the end of June, a Michigan court filed a temporary restraining order (TRO) against Kalshi, a derivatives contracts market (DCM), preventing the platform from offering sports events contracts in the state.
In response, Kalshi reversed the trades to comply with the TRO, trades that had already been executed.
But in a statement released on July 14, CFTC chair Michael Selig claimed the move was an “unprecedented step” and that the derivatives regulator would not sit back while the courts “bully registered entities” into going against federal regulations.
The CFTC also instructed Kalshi to keep offering sports events contracts in Michigan and fulfil open trades as part of an emergency authority.
“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 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.”
Kalshi’s head of enforcement Robert Denault took to social media platform X to explain the platform had been put in an “impossible position” following the CFTC’s statement.
“We are disappointed by this decision and believe it is unfair to Kalshi,” he wrote. “We already acted and unwound the trades, as the Michigan court order required us to do.
“We are being put in an impossible position, looking to follow state court orders that may contradict our federal regulatory obligations. We did not have a choice.”
The Michigan court’s TRO ended on July 13 and followed Nevada securing a preliminary injunction against Kalshi in April, which saw the platform shut down in the Silver State for 14 days.
The Nevada Gaming Control Board then asked a district court to hold Kalshi in contempt of court in June for failing to comply with the request, after investigators were still able to buy sports betting contracts on Kalshi’s app.
Kalshi’s battle against regulators also extends into Europe, where it has been blocked in Spain alongside fellow prediction markets platform Polymarket.
Kalshi CEO and co-founder Tarek Mansour, speaking prior to the CFTC’s statement, said calling prediction markets gambling was “easy low-hanging fruit.”
Meanwhile, the CFTC released a set of proposals in June which tightened the framework against offering event contracts. Another sentence to explain?
On July 21, US Congress will hold a hearing about prediction markets titled Examining Prediction Markets: Customer Protections and Market Integrity in Sports Event Markets.