The CFTC has stopped Kalshi from reversing completed Michigan trades, creating a direct conflict between federal market rules and a state gambling order.
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Kalshi can no longer cancel affected Michigan transactions after the CFTC stayed an emergency rule request filed on July 2.
The federal regulator focused on trade finality rather than whether Kalshi can offer new sports contracts in Michigan. It warned that reversing settled orders could weaken confidence across regulated financial markets.
“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,” CFTC Chairman Mike Selig said.
A Michigan circuit court had ordered Kalshi to halt sports-related event contracts after the state attorney general argued that the platform violated gambling laws. The order also required selected customer trades to be voided and refunded.
Kalshi then asked the CFTC how it could follow the state directive without breaking federal exchange rules.
“A state cannot force a registered contract market to violate its obligations,” Selig said. “The Commission will not allow states or state courts to bully registered entities into violating the Commodity Exchange Act and CFTC regulations.”
Michigan became the first state to seek direct reversal of trades already executed on a federally regulated exchange. The CFTC said such action “would risk shattering public confidence by giving traders cause to worry that the trades they execute today may be unwound a week — or a year — later.”
The dispute forms part of a wider legal fight over sports prediction markets. Nearly two dozen states argue that sports event contracts operate like unlicensed betting, while the CFTC says federally registered exchanges fall under its exclusive authority.
The agency has entered cases involving Arizona, Connecticut, Illinois, Kentucky, Minnesota, New Mexico, New York, Rhode Island and Wisconsin. It has also filed court briefs in federal appeals cases and before the Massachusetts Supreme Judicial Court.