CFTC Intervenes to Prevent Kalshi from Cancelling Trades Ordered by Michigan Court

The CFTC asserts its authority over prediction markets in response to a Michigan court ruling.

The U.S. Commodity Futures Trading Commission (CFTC) has intervened in a legal dispute involving prediction market operator Kalshi, preventing the cancellation of trades ordered by a Michigan court. This move underscores the CFTC's claim to exclusive regulatory power over Kalshi, which operates as a designated contract market (DCM).

Following a Michigan county circuit court's ruling that aimed to halt online sports betting and void trades made by Michigan clients, the CFTC issued a directive prohibiting Kalshi from complying with the court's order. CFTC Chairman Mike Selig emphasized the commission's stance, stating, "The commission will not permit states or their courts to intimidate registered entities into violating the Commodity Exchange Act and CFTC regulations."

This intervention marks a significant escalation in the ongoing conflict between state authorities and the CFTC regarding the regulation of prediction markets. Michigan's attorney general had characterized the trades as illegal gambling, prompting the court's involvement.

Selig further warned that cancelling executed trades could destabilize the market and undermine trust among traders, stating that such actions could lead to uncertainty about the validity of future transactions. The CFTC has previously acted against other states attempting to restrict event contracts as gambling, but Michigan is the first to directly challenge transaction activities.

Kalshi is currently appealing the Michigan court's order, having filed an emergency appeal with the CFTC to protect its operations and maintain the integrity of its market.